Chancellor George Osborne has announced proposals to cap the charges claims management companies (CMCs) can apply to customers.
As part of his Summer Budget, Osborne has called for a clampdown on nuisance calls made by CMCs and announced that a "fundamental review of the regulation of CMCs" will take place, with a report due out in early 2016.
This review will also consult on whether a cap on the charges CMCs apply to customers should be introduced. The level of a potential cap has yet to be detailed. At present there's no restriction on how much CMCs charge customers.
CMCs offer complaints handling services on a range of areas including, financial products and services such as Payment Protection Insurance (PPI), personal injury, employment, housing disrepair, criminal injury compensation, and industrial injury disablement benefits
MoneySavingExpert.com always warns against using these firms, as they take a cut of around 30% of what you reclaim, when in the vast majority of cases it can be done yourself for free. See our Reclaim PPI For Free guide for how to do this yourself.
'It is right the Government is looking into this sector'
Joanna Elson OBE, chief executive of the Money Advice Trust says: "Claims Management Companies exist to make a profit out of a service that consumers can access for free via the Financial Ombudsman Service – and it is right that the Government is looking into this sector.
"The Government must ensure that people who have a right to reclaim money, many of whom have low or no incomes and are in financial difficulty, are not taken advantage of by these companies."
Rogue claims firms face fines
Rules, which came into force at the end of last year mean rogue CMCs, which bombard people with nuisance calls and provide a bad service, face penalties of up to 20% of their annual turnover.
Breaches could include using information gathered by unlawful unsolicited calls and texts, wasting people's time and money by making spurious claims, and using misleading marketing.
How to complain about a CMC
If you want to complain about your CMC, here's what you need to know:
- Complain to your CMC first so it has an opportunity to resolve your complaint.
- Give it eight weeks to resolve the complaint. Once it sends you a final response (even if this falls within eight weeks), if you are still unhappy, contact the Legal Ombudsman for complaints about poor service, such as the result of your claim or the fees it's charged you.
If your complaint is about poor conduct such as if you receive unsolicited calls or texts or the company's not registered on the authorised business register, contact the Claims Management Regulator (CMR). Again, you'll need to contact the CMC first (there's no limit on how many times a customer needs to contact the CMC) with your complaint and if after eight weeks you don't get a response or you receive an unsatisfactory response, you can then take your complaint to the CMR.
- Make sure you keep a record of your complaint and any details about communication between you and the claims company.