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?