It’s been a long time coming but finally last week the Ministry of Justice took steps to give the claims firm industry a much needed kick up the backside.
Claims management company text messages, phone calls, emails, TV and radio adverts are all a perennial annoyance it can feel it is impossible to ignore.
But for advisers, these firms are not just an annoyance, they can potentially bleed a firm dry, taking up valuable resources like time and, most importantly, money.
Mortgage Strategy set up the campaign Make Claims Firms Pay earlier this year after we were deluged by brokers complaining that they were being swamped by bogus claims.
So the news last week that the Legal Ombudsman is to be given powers to award redress to consumers who feel they have been mistreated by CMCs is welcome.
The MoJ recently revealed that it had received 8,521 consumer complaints relating to financial services claim firms in the year to March, which accounted for 93 per cent of all complaints, despite only making up 17 per cent of firms that it regulates.
It has also received more than 1,000 complaints from financial services companies about claims management firms.
Under the plans announced last week, the Legal Ombudsman could award compensation of up to £30,000 to a consumer or take action to ensure a case was properly resolved. Officials are considering increasing the limit to £50,000.
But the MoJ needs to go further, in particular, to protect brokers unfairly targeted by these firms.
Our original Make Claims Firms Pay campaign argued that with brokers potentially incurring a fee of £500 when the Financial Ombudsman Service investigates a claim, a simple solution was for bogus claims to pay a £500 fee to the FOS.
The only effective deterrent against these parasitic firms is a financial one.