Nearly 400 brokers have called on the Ministry of Justice to order a ‘root and branch' review of claims management companies.
In an open letter to MP Nic Dakin and justice minister Helen Grant, 379 members of the Cherry intermediary community welcomed attempts by the two politicians to tackle poor practices by CMCs but demanded further action.
The letter continued: “May we respectfully request that a 'root and branch' review of the practices of CMCs be undertaken immediately with this review to include consideration of the MOJ's regulation of Claims Management Company practices as well as the current arbitration procedures overseen by the FOS which, in our view, are weighted unfairly and far too heavily against intermediaries.”
Honest financial intermediaries hit by false claims were the “ultimate victims” of CMC activity, it added.
Donna Hopton, director of broker network Cherry, said: “Our phones have been ringing off the hook and many people have given us examples of how they have been affected personally. We urge people to respond to the poll via our home page as soon as they can, and to ask others to as well. It is essential we shout about this - and the more of us doing so, the better.”
Figures from the Financial Ombudsman released last week suggest financial services firms are just as likely to face criticism from other financial services firms as from CMCs.
Hopton said the response of the FOS to criticism was “disappointing”. She added: “We implore them to act responsibly and challenge them to put forward an urgent and suitably constructive response to the matter based on a full and proper understanding of what verges on, or perhaps is, criminal activity.”
Dakin, who is MP for Scunthorpe, brought up the issue of damage to small business from CMCs in Parliament in March.
In December 2012, the Ministry of Justice announced it had cracked down on 352 CMCs for bad practice over the past six months. It also promised further legislation protecting consumers from unscrupulous CMCs.
