Hundreds of CMCs ‘cancelled’ by MoJ
The Ministry of Justice has closed down about one in five claims management companies in the past year, according to figures obtained by the Gazette.
A freedom of information request to the MoJ’s Claims Management Regulation department has revealed that 734 businesses were ‘cancelled’ in the 12 months up to the end of March. The closures were partly prompted by 9,570 complaints from the public. By the end of the financial year the number of authorised businesses stood at 3,018.
In the latest broadside against the sector, the banking industry alleged this week that claims management companies are slowing down the processing of legitimate claims over the mis-selling of personal protection insurance (PPI) by sending speculative letters to every bank.
Research by the Financial Times last month showed that Britain’s banks are now rejecting as spurious up to half of all compensation claims relating to mis-sold PPI. The Ministry of Justice has confirmed it has set up a dedicated team to deal with poor practices by some claims management companies who handle mis-sold PPI.
Anthony Sultan, executive member of trade association the Claims Standards Council, said the volume of closed companies did not mean there is widespread malpractice. ‘A lot of companies have decided it is not for them and they don’t want to be in claims. It’s very important for those heavily involved in the industry that the highest standards prevail and anyone who fails to meet them is exited from the sector.’
Sultan told the Gazette he would ‘condemn’ any firms involved in speculative claims. ‘It is not widespread, and the vast majority are regulated and operate in a sensible fashion,’ he said. ‘As in any industry you come across rogue traders but the trade body acts quickly to bring an end to it.’
The MoJ said record numbers of staff are being allocated to regulating claims management companies, both at its headquarters in London and its compliance office in Staffordshire. The number of staff has risen to 57, up from 32 in 2007 when the MoJ took charge of claims management regulation.
The MoJ has cut the estimated cost of claims management regulation, financed by the companies themselves, by 17% to £2.5m for 2012/13. But rising staff costs and an expected fall in the number of companies led to higher charges to firms.
Comments
Speculative Invoicers being 'cancelled'
Speculative and spurius claims is something I have been banging on about for ages. No surprise to see some CMCs jumping on the bandwagon but well done to the MOJ for 'cancelling' the offenders. This kind of behaviour can lead to genuine claimants suffering because of banks and other firms being bombarded by complaints which are not genuine or which have not been investigated properly by the CMC prior to submission.
Let's make no mistake here. Submitting speculative or spurious claims is basically dishonesty. In my opinion, knowingly submitting claims which are not genuine is fraud. Submitting claims without a care as to whether they are genuine or not is downright lazy, unprofessional and irresponsible. These offenders, if left unchecked breed anger, resentment and a loss of confidence in regulation and I know of some small businesses which have been bombarded with claims which are not genuine.
Well done MOJ. It is important for the victims of 'speculative invoicing' to know that action is being taken.
No, you don't.
"Speculative Invoicers being 'cancelled'
Submitted by Kelly Matthews on Fri, 13/04/2012 - 06:11.
I know of some small businesses which have been bombarded with claims which are not genuine."
No, you don't.
I have worked in the SME/Mid- tier sector for years representing businesses and defending them against claims, and none of them I have ever worked with have been "bombarded" with claims that are not genuine. Banks who have sold millions of PPI claims may well be "bombarded" with claims that are not genuine by CMCs, but small businesses would never even be put in a position to be "bombarded" with claims that are not genuine as their level of exposure to the type of work CMCs conduct is so low.
It's this kind of utter nonsense spouted by people who take the majority of their information from the Daily Mail and their ilk that leads to legal aid being cut, rights being eroded and access to justice reduced.
Bombarded
Our business was called at least 4 times a day last week by PPI claims companies despite telling them it was not a residential address and there was no way we as a business would have opted into any database they hold. There were at least 6 separate companies calling us which would indicate they are buying the data from brokers. The details of the calls were all recorded by our systems and we have sent complaints to the MOJ.
So you weren't bombarded by
So you weren't bombarded by claims then, were you? You were bombarded by calls from telemarketers attempting to solicit you to make a claim, which is actually the opposite.
By all means, report them to the MOJ, I have no sympathy for them whatsoever; however this is not in any way shape or form evidence of unjustified claims being made or that your business has been bombarded by claims.
Indeed it is unlikely to have
Indeed it is unlikely to have been a CMC anyway, but a telemarketer who then sells the cases on to the CMC (albeit possibly owned by the same company).
Totally agree, Anon. My firm
Totally agree, Anon.
My firm does PPI claims, and I wouldn't trust what the banks say as far as I could spit. The banks, FOS, FSA, come out with all this crap that "customers don't need help to reclaim their PPI, they can just do it themselves". If that were the case, why don't the banks - who have the records - simply write to everybody to whom they sold a PPI policy with the cheque?
I seriously doubt that there are "speculative" claims, and I wouldn't even know what a "speculative" claim would be anyway. What I do know is that the banks want to avoid paying out and don't like people who represent claimants. Just like insurance companies. Simple.
And if the banks actually complied with their obligations under the Data Protection Act, it would be a start. I have run numerous cases against banks who refuse to provide documents under the DPA - and they always cave in and pay costs and then give the disclosure, so why not just comply? Instead, they send letters back saying "you have sent us an authorisation form, but the date on the covering letter doesn't match the date on the form of authority" / "the form of authority is signed in green ink instead of blue" / "you haven't included the customer's middle name" and the like.
My only real gripe with CMCs is that they should (particularly now that ABSs are permitted, which I am opposed to) be regulated by the SRA like the rest of us, and play by the same rules. Other than that, it's a free world. If I want to (as in PPI) I am happy to compete with them, and clients will choose me over them as they know I am a solicitor (albeit that in the near future that will not count for anything and will be a meaningless expression).
Small companies and CMCs.
Submitted by Anonymous on Fri, 13/04/2012 - 09:35.
"Speculative Invoicers being 'cancelled'
Submitted by Kelly Matthews on Fri, 13/04/2012 - 06:11.
I know of some small businesses which have been bombarded with claims which are not genuine."
No, you don't.
..........................
Anonymous
Yes I do.
It is true that banks are presently inundated with many speculative PPI complaints submitted by CMCs. However, smaller companies are exposed to PPI and a significant number of other financial product complaints. I know because I have spoken to owners of these companies who complain about the amount of time and resources they have to devote to dealing with timewaster CMCs.
Of course these companies do not get the same volume of complaints. Large banks have hundreds of people dealing with them though. But think for a moment before commenting. If there is only one person available in a small business to deal with complaints,(which often is the case) then in that context even half a dozen CMC complaints might feel like being bombarded.
Nonsense
Ah, so you "know" people who own small businesses that missold PPI to consumers?
Honestly, I never heard such utter rubbish. You use a straw man to make a ridiculous point and then just produce more drivel to explain it.
Domcoop's PPI Complaints Department
Domcoop has raised further interesting points.
I suppose he has never come across a speculative claim in his firm because saying he had would be admitting that he takes them on. To be fair though I expect he is right because unlike CMCs, he is not trawling for PPI complainants. Also I doubt many would pay a solicitor to take forward a PPI claim if they did not think they had a genuine case.
CMCs take PPI and other claims on mass. They often do not investigate the cases and just send a bunch of long winded legalistic and generic allegations with no supporting evidence to the bank hoping they will just pay up. That is the problem here and why CMCs are being closed down left, right and centre. And who needs the SRA when the MOJ are simply 'cancelling' them when they step out of line?. Perhaps the MOJ might 'cancel' a few solicitors while they are about it.
Anyway the main point I wanted to return to is Domcoop's PPI clients and his comments suggesting that a solicitor is needed to pursue these claims. Now - the tone and content of alot of Domcoop's postings on many issues is that members of the public should take more responsibility for themselves. Therefore why (as suggested by him) does anyone need to engage a solicitor to pursue a PPI complaint? Domcoop might be able to dress up and pad out the complaint a little, fill out a few forms and use a few fancy words in his letter to the bank. But what is the point paying him to do this when it is so easy to do it yourself - or go to the Ombudsman which is free?.
For example, how does he convince a client that they would be better off using him.
Does he think there is a better chance of success using him rather than the ombudsman?
Perhaps Domcoop might enlighten us.
You really are a solicitor
You really are a solicitor hating troll Kelly.
No, nobody HAS to use a solicitor to go to Court or seek other form of redress. Nobody needs to use a doctor, surgeon, accountant or other qualified person to act for them in anything whatsoever. This is still (just) a free country.
However any person who actually wants to achieve their objective with the minimum of aggravation and cost (and with the prospect of redress if the job is done badly) would be well advised to use someone who knows whereof they speak. Its not compulsory-but its not a bad idea.
Oh, and yes I'd bet Domcoop
Oh, and yes I'd bet Domcoop (whoever he is-wish I knew) would get a better result than doing it yourself.
As above I don't know who he is but the reasoning is quite simple-he puts up a good argument and defends his corner. Racing certainty he does the same for his clients. Not that you'd ever admit that as a likelihood!
PPI claims
"However any person who actually wants to achieve their objective with the minimum of aggravation and cost (and with the prospect of redress if the job is done badly) would be well advised to use someone who knows whereof they speak. Its not compulsory-but its not a bad idea"
Mickey Mouse could probably achieve this objective.
The point is nobody needs a solicitor to pursue a PPI complaint when you can do it yourself or get the ombusdman (who presumably deal with thousands of cases) to do it for free.
And what does Domcoop charge his clients for taking on their claims? Well, I guess it is a fair whack.
And if he is successful in obtaining a reasonably early resolution I would doubt that the banks would refund any legal costs incurred as they will say these were not necessary. An expensive and often unnecessary excercise.
Then use Mickey Mouse! As
Then use Mickey Mouse!
As stated, it is not compulsory to use an experienced or qualified person. Simple.
Solicitor hating troll
‘A solicitor hating troll’…..thats eloquent, and probably a good reason for you to stay away from representing clients in court if ever you get the chance, clearly advocacy is not your strong point.
I have read the thread with interest. First of all bombarded by spurious claims is probably an embellishment. It is true most, possibly the majority of CMC’s, engage in some fairly low tactics in order to secure work. Equally it is true that the MoJ polices these activities and is quick to weed them out. My concern with the MoJ is that it tends to treat every CMC with equal contempt and certainly seems to express a guilty until proven innocent policy. I am not sure why they need so many staff, with fewer firms remaining on the regulated role, and it is not an attractive sector to branch into, but if they say they need the people so be it although other than a couple of emails a year to collect my fees and registration details I don’t hear a thing from them. On the subject of bombarded by claims my firm gets bombarded with speculative correspondence from solicitors firms usually canvasing for referral work. This correspondence is unsolicited and unwelcome and until that practice is policed I don’t think solicitors firms should say too much on the subject of unwanted correspondence. I think the banks can probably defend themselves fairly well.
I think that most CMC’s would welcome regulation by the SRA, it might be cheaper. However, your status as a solicitor is not what gives you the exulted rights you enjoy, it’s the fact that you are regulated by an authorised regulator under the Legal Services Act. If CMC’s came under the control of the SRA then they would be able to compete with solicitors firms in more sectors of legal service and I don’t think most solicitors would want that, although most CMC’s would.
It is not reasonable to say that mosts CMC’s engage unqualified people. Where do you think all those would be barristers end up that don’t get pupillage or would be solicitors that don’t get a training contract?
For the record, my firm is perhaps unique in that we opted for regulation by the MoJ, because as a law firm practicing construction law, adjudication and arbitration, but not being solicitors or barristers, neither the SRA or BSB would take us. We practice very little regulated claims but we are proud of the fact we have authorisation to do it, and willing pay the fee every year. Also, some of my closest friends are solicitors and barristers but every profession has those members who simply shouldn’t be there, and that includes law regardless of at what level you practice. Perhaps what we need is some form of competency based qualification for Claims Managers, maybe some form of renewable licence to be taken every five years, and then introduce the same thing for Solicitors and Barristers as well, that should weed out the rubbish from our respective professions.
Yes, even more regulation is
Yes, even more regulation is the answer.
"would be barristers end up
"would be barristers end up that don’t get pupillage or would be solicitors that don’t get a training contract?" - They are still unqualified, and presumably didn't secure training contracts or pupilages because they were no cut out for legal work.
There were people on my LPC course who would struggled throughout the course, had poor academics, and should never have been there. Needless to say they were always blaming the course lecturers for their poor results and resits.
So long as the company makes
So long as the company makes clear that their management and staff comprises people who have failed to become admitted to the appropriate profession, I think that companies such as CMCs should be permitted to be regulated by the SRA.
My problem is:-
1) A large - and growing - number of CMCs (who usually call themselves "legal consultants" or "dispute services") who nevertheless practice litigation and advocacy (when to do so is a criminal offence) and are not regulated at all. Fine, if somebody wants to use them, then let them (so long as the client knows that they are not qualified). But then to be able to avoid complying with the rules and regulations, and incurring the expenses of the rest of us, it is just unfair.
2) ABSs, which allow a CMC / Bank, etc., to employ a call centre stuffed full of minimum wage "caseworkers" and who needs to employ only one solicitors, who needs only to be three years qualified, to be able to actually call themselves "solicitors". This is misleading the public.
As for Matthew Kelly's comments on PPI cases, we charge 20% inc VAT which I think is quite reasonable. Each client knows and signs up front to pay that fee, and they all are told in writing that they can do it themselves. (In fact, my firm tells ALL of its clients, in writing, that they can do their legal transaction themselves, because of course they can. You don't need a solicitor to bring a personal injury claim. You don't need a solicitor to represent you in court. You don't need a solicitor to convey a house for you). My clients choose the service which is provided, because they want to, not because I force them to.
Good grief, surely you can't
Good grief, surely you can't mean that the Law Society/SRA isn't cracking down on those people/companies doing regulated work without qualifications?
Half the CMC's would simply
Half the CMC's would simply not be able to tolerate the level of regulation that solicitors have to endure. Also, if solicitors are behaving themselves and doing the necessary dilligence half of the work that is referred on should not be taken as most of the clients had probably been appropriated by the CMC in a manner that is in breach of code of conduct.
Solicitors are not, nor hould
Solicitors are not, nor hould be expected to be, the regulatory body for CMC's. That is the job of the Ministry of Truth, sorry, Justice.
But the rules say we have to
But the rules say we have to regulate our referrers. So we are expected to make checks that clients we are referred have not been procured by "cold calling" in the first place or any other means that a solicitor would be prevented from doing himself.
Essentially the message for the future (with the potential ban on referral fees) is find your own clients. I'd say that when CMC's discover the actual level of regulation they have to abide by to become an ABS, a lot of them will think twice.
Well, the rules shouldn't say
Well, the rules shouldn't say that, should they?
They are a perfect example of the bureaucrats shifting of responsibility from themselves to others, because the bureaucrats cannot, or will not, do their job properly. They are naturally quick enough however to pocket their extensive salaries.
20% fee - very reasonable
Domcoop
20% seems very reasonable to me. In fact, on that percentage I'd be surprised if you are making a profit. Still, I am sure taking on these claims ensures the client has the expertise they want and perhaps this generates goodwill and other work.
Claim Management Companies on the other hand typically charge 25% or even more. And then often they simply sub-contract the work out toThe Financial Ombudsman Service and others.
Still, I would be interested in knowing whether taking on these claims pays or not for your firm. As I said before, I doubt the banks are paying your initial costs when they roll over on the first or second letter. And what do you do if you get nowhere with the bank?
Does your firm take these to court often? On mass perhaps? (as in speculative invoicing - sorry could not resist!!!) The reason I ask is because they are relatively small claims and again I cannot really see how this is worth your while if dealt in house.
We wouldn't do it if we
We wouldn't do it if we didn't pay.
We aim to provide a good service at low cost. We also do, for example, issuing of court claims for £72 plus VAT, low cost wills, etc.
I am not going to give the game away (although it is not rocket science) but many people sell goods and services for a lot less than £72 and make a profit. A well organised system, a lot of IT ( I know my way around a shell script, Postgresql, and others) and keeping costs low, it isn't hard.
"Speculative invoicing", or issuing knowingly unmeritorious court claims en masse would not work. It is preposterous to suggest otherwise. Firstly, who is going to pay? Secondly, why would they pay? Thirdly, what would the judges say when the cases all lose? Fourthly, there is a risk of being on the wrong end of a wasted costs order, and SRA sanction and much more.
NB issuing a claim which might win or might lose is not "speculative". Any claimant has (just about) the right to have their claim heard in court and adjudicated upon.
20-25% + vat? seriously
The claims company I used only charged 15% with no added vat.. So I don't see how companies like gladstone brookes can charge 25% + VAT and not get into trouble with the MOJ?
Are companies who charge 20-25% + vat not ripping off client? are these not the companies that should be targeted?
PPI claims
Were there not some other issues with Gladstone Brookes? Seem to recall some negative publicity somewhere - BBC watchdog perhaps? I think something to do with the way some of these companies go around touting for business and promises they could not keep.
Anyway - as for your 25% comment I believe you might be right. It is far too much when you consider that alot of CMCs do little or no work for their client. Domcoop's rate seems reasonable however.
Domcoop - if all your work is in house and you make a profit good luck to you and I wish you well. My mention of speculative invoicing was a joke so I won't go back there.
PPI
I read all of the comments above with interest, particularly those concerning claims of a spurious nature made to banks about the sale of PPI insurance.
Firstly the reason that any of this is being discussed is that the banks, third party lenders and finance brokers sold and in 90% of cases miss sold this worthless insurance on virtually any financial product they could over the last 20 years.
Secondly this miss selling was not accidental but deliberate policy. Our company has seen appalling examples of the sale of PPI cover to people who could never of claimed on the insurance sold to them.
Thirdly why did the institutions do this? They did it to make money, at the height of the boom, one of the high street lenders use to advertise that they had the cheapest personal loan available to anyone. How could they do this as banks largely borrow money at the same rate. This bank had the highest penetration rate of the sale of PPI direct by its own bank staff to the general public. This meant in real terms the bank was using the sale of this insurance to subsidise the ‘front line interest rate’ so that the client saw the bright sparkly rate and not the hidden insurance which was sold to tem for piece of mind. The banks piece of mind !
Fourthly the sale of PPI was created by using smoke and mirrors this was not real money. The banks included the price of the insurance in the loan document but the money never actually moved anywhere or if it did it was an internal transaction. The loan was real money that the bank had to part with; the money charged for the PPI insurance was not real money. Even the banks recognised that if they gave the consumer the money for the insurance that the consumer would not spend it on insurance and if they did the bank would not see it.
Fifthly the banks in particular brow beat staff in selling these products over the counter. We had a 70 year old client who was sold PPI and even on reading the banks documents it said once you are 65 you can’t claim under this policy, he was 70 when they sold it to him. Are CMC’s needed YES because the bank in this case when the client claimed turned him down.
Sixthly the client’s often did not know if they have PPI or rather can’t prove it. We have had claims go to court on credit cards where the lender has made statements t he effect that PPI had not been sold to the client, it was not on the application form but on discovery ad when the statements ar produced there it is. I am sure that the banks have had some speculative claims. Are quality control has factored out many claims which cannot be made. However our service is used by many people who have had their claim refused by a bank or seller of this insurance and we have then been successful in reclaiming again. The banks have miss sold this insurance an huge numbers of other forms of financial products and the public have had enough.
All excellent points-but I
All excellent points-but I hope your quality control of the cases is better than that of your grammar.
Two wrongs
David
Appreciate what you say about this and in many respects you are quite right. The banks were greedy and mis-sold a good percentage of these policies and the ones that were suitable were probably more so because of luck than judgement.
That said, CMCs seem to be little better. They are not some kind of consumer champion as some portray themselves. They are in it for the money and submitting some spurious claims is harming their reputation and if anything, deflecting criticism away from the banks. Making spurious claims wastes everyones time and delays payments to those genuine complainants. Also there have been alot of complaints made by customers about the way CMCs have conducted themselves in taking on these cases - hence the closures of these firms.
Finally, I have to disagree with you on one important point. CMCs are not needed. If the 70 year old customer is turned down by the bank he can go to the ombudsman. It is no more onerous than contacting a CMC and is free. Interestingly, that is one area where the Law Society agrees with the ABI which was mentioned in this recent article on here. (i.e that many CMCs are unnecessary)
http://www.lawsociety.org.uk/newsandevents/news/view=newsarticle.law?NEWSID=442398
'While we agree with the ABI's report that there can always be improvements to the system – and we believe in particular that claims management companies have no useful role to play in the system - the current government proposals in the Legal Aid and Punishment of Offenders Bill will mean that many victims will lose their opportunity to gain the compensation they deserve.