14Feb

The Association of Professional Financial Advisers (APFA), the principal trade association for financial advisers in the UK, has responded to the recent proposed changes to the Conduct of Authorised Persons Rules for claims management companies (CMCs).

In late November 2013, the Claims Management Regulator (CMR) at the Ministry of Justice published a consultation paper, in which its proposals included: a requirement to establish that claims have a realistic chance of success before submitting them; new obligations to provide evidence to back up claims; and the need to conduct thorough audits of data obtained, e.g. sources of marketing leads.

In the main, APFA approves of the proposed new rules, and the recently announced new enforcement penalties available to the CMR. Given the demands the advisory community says CMCs place on them in terms of time spent looking into complaints and case fees to the Financial Ombudsman Service (FOS), it is perhaps not surprising that this is APFA’s stance.

However, APFA does highlight a possible way in which its members might mis-interpret one of the proposed new requirements, namely the need to substantiate claims made. The Association asks if some financial services providers will interpret this as meaning that written documentation is required to be provided, and will thus automatically reject complaints when this is not available. However, it goes on to say that it does not believe that the risk of this happening is high, as it is accepted practice to accept oral submissions from clients when a complaint is made. Even if this did occur, it says there would not be customer detriment, as the FOS would overturn any judgement which the firm made against the customer as a result. APFA does state however that the customer must provide some evidence of having dealt with the firm it is complaining about, e.g. a policy number.

In the response, the adviser body acknowledges the merits of CMCs by saying: “We … accept that the best claims management companies can provide a useful service to some consumers.” However, in the very next sentence it touches on a number of concerns it has about the activities of CMCs, when it comments that: “APFA has become increasingly concerned about the proliferation of cases where CMCs submit claims where no policy ever existed or there is no evidence of mis-selling. A number of our members have reported to us that they have received claims which upon investigation proved to be completely unsubstantiated.” Alan Lakey, partner at Hertfordshire-based Highclere Financial Services, won a court case against Lancashire-based CMC Aims Reclaim in October 2013. Aims Reclaim was forced to pay Mr Lakey’s costs and to compensate him for the time he spent investigating a payment protection insurance claim where no such policy had in fact been sold.

APFA has campaigned for tighter regulation of CMCs for some time. Also in January 2014, the Association called for CMCs to be required to pay case fees when they forward complaints to the FOS, and for these to be refunded only if the complaint is successful.