/ Money

Update: isn’t it time Scotland starts regulating claims companies?

Law and regulation

Unlike in England and Wales, claims management companies aren’t regulated in Scotland. So isn’t it time that this regulation gap is sorted out?

Claims Management Companies (CMCs) have gained themselves a pretty poor reputation. These firms are often found touting for business by offering to help you claim for something like mis-sold Payment Protection Insurance, where they invariably pocket high charges which eat into any compensation you’re entitled to.

But as Westminster looks to introduce tougher rules for CMCs next year, we want to see more done to make sure Scottish consumers are also adequately protected.

Addressing the ‘regulation gap’

I gave evidence to the Scottish Parliament’s Justice Committee today on the regulation of CMCs in Scotland. Using our research into the harmful practices of CMCs, including cold calling and high charges, I highlighted the need for the Scottish Government to act urgently to mirror new rules coming into force in England and Wales.

The current situation, where consumers pay high charges to CMCs for what might be a small amount of work to progress a claim, is unacceptable. We want to see fewer people using CMCs to the extent they do today and are extremely supportive of measures, such as a cap on charges, to reduce the costs to consumers of using CMCs.

With average commission rates of 25% to 30% commission, combined with widespread nuisance calling there is a strong argument for greater regulation. And with 41% of people we surveyed in Scotland saying that they’d felt intimidated by such calls, it’s clear that this is an issue that needs urgent attention.

It’s only through tougher rules and robust regulation that consumers will be properly protected from these poor practices. Worryingly, unlike in England and Wales, CMCs in Scotland are currently not regulated at all.

This ‘regulation gap’ risks Scotland becoming increasingly attractive to CMCs, leaving Scottish consumers open to harmful practices. The new rules set to be introduced in England and Wales next year risk driving CMCs to Scotland in order to benefit from the lack of regulation.

Consistent rules for CMC activity will help limit confusion for consumers – who will be confident that any cold calls received are from illegitimate firms – and limit the opportunity for CMCs to profit from discrepancies in regulation.

What needs to be done?

Addressing the regulation gap means mirroring the tough rules in England and Wales either through the Civil Litigation Bill passing through Holyrood or the Financial Guidance and Claims Bill passing through Westminster.

The Scottish Government must act now to ensure that Scottish consumers enjoy the same protections as their English and Welsh counterparts. Both Bills present an important opportunity to significantly reduce the harm caused by CMCs and empower consumers to claim redress for themselves, without having to pay high fees and charges for CMC services.

Ultimately, regulation would mean all consumers are adequately protected and, empowering them to claim redress for themselves and ensure that more consumers are able to keep all the money owed to them.

Update: 17 November 2017

Win! CMCs to be regulated in Scotland after the government introduced an amendment to the Financial Guidance and Claims Bill. This Bill is currently making its way through Westminster and one of its aims is to introduce regulation of CMCs in Scotland.

It proposes that the Financial Conduct Authority would have the power to regulate all CMCs operating across Great Britain and guarantee that Scottish consumers enjoy the same level of protection as their English and Welsh counterparts.

Tougher regulation of CMCs is undoubtedly a good thing. But ultimately we want people to be empowered to claim redress for themselves and take home all of the compensation owed to them. Too often it has been far too difficult for consumers to make a claim – this relies on people knowing when they have cause for complaint and understanding how straightforward the process can be.

We want to see firms, rather than consumers, pay CMC charges when they are at fault. Not only would this mean consumers no longer have to pay high CMC charges, it will also incentivise firms to set up easier and simpler redress processes, meaning fewer consumers will need to use CMCs when making a claim.

What do you think about making firms pay CMC charges? Should the consumer have to pay high charges for these services? Have you used a CMC to handle a claim for you before?

Comments

Make buying and selling of personal data illegal.

Make all cold calling illegal.

If Which? hadn’t pushed to extend the deadline for claiming PPI, the problem would soon be going away. But now we have another 2 years of nuisance PPI calls. Thanks Which?

I simply don’t understand in a “United Kingdom” – and has been since the year dot – why we don’t have harmonised laws and regulations. Same with the Consumer Rights Act – only 5 years in Scotland, 6 years in the remainder.
What will the next “mis-selling” jamboree be? Low interest rates? Standard variable tariffs? Expensive house and car insurance, unarranged overdrafts………..They are already established in the accident market. I wonder just how many PPIs were genuinely mis-sold, and how many people were encouraged to jump on the compensation bandwagon (paid for by all the banks’ other customers). Just a question 🙂 .

The point about the United Kingdom is interesting. Scotland only joined in 1707, and brought a bundle of its own regulations when it did, so that almost certainly accounts for some of the differences.

But talking about harmonising laws it largely depends on how far you choose to go. Every group of people, every Hamlet, Village, Settlement, Town, City, Principality, country, continent and quite probably planet is convinced they’e all unique. Every one of them is different – just like all the others.

And that’s why so many voted Brexit; they’re convinced that the ‘big, bad Europeans’ who are clearly terribly different in so many malign ways, will dictate our future to us, blissfully and utterly unaware that we had to approve all the legislation.

Your argument can easily be applied to the EU.

In terms of some legislation, Scotland is ahead of England and Wales by some margin.

I am quite sure the Scots would not wish to go backwards by adopting weaker rules formulated in London.

Why do Scots find it attractive to use those companies ? because they are too poor to employ a solicitor what with the Westminster government making it harder by reducing the legal aid allowance . Yes the commissions are high but how does that compare to zero £££ . Dont any of you remember the media storm – too many poor folk claiming againg businesses – make it stop HMG –and they did. As regards the cry out now secretly pushed by Westminster to “do away ” with Holyrood in the Brexit “secret ” negotiations are they looking for a revolution in Scotland ? you all know what gets Scot’s backs up –don’t you ? getting dictated from England . What would happen is increased support for the SNP , the very thing HMG doesn’t want and then talk about removing Scottish law OMG !! are they insane or what ? Scotland was an independent governing country going way back in history , that the Scots befriended England’s enemies maybe doesn’t help but many still bringing up Culloden . For those not well up in Scottish history TWICE after invading Scotland as many documents relating to Scotland,s establishment and history were gathered up and sent to England in ship’s from Leith . Funnily enough ( obviously hadn’t watched the BBC weather forecast )BOTH ships SANK on the way down – must have been a “co-incidence ” eh ? If the intention is to make permanent “North Britain ” or as John Lennon would say – Scotlandsheer then HMG advisers are “out of their minds” the tanks would be back in George Square Glasgow but this time not courtesy of Winston.