A warning has been published to about the danger of employing claims firms to help them make complaints against financial institutions.
The FSA, the Claims Management Regulator, the Ministry of Justice, the FOS and the FSCS have today published a note for consumers warning them of the danger of employing claims firms to help them air their grievances against financial institutions.
The guidance urges consumers and businesses to think carefully before they pass their complaints to claims companies. It warns that these firms can charge ‘significant’ fees for their services, in some cases up to a third of the total compensation awarded. Compensation is not always paid in a lump sum, sometimes taking the form of a reduction in the amount owed, for example payment reductions on an outstanding loan. This means the claims firm’s fees in some cases will be higher than any lump sum payment received.
The guidance refers to the fact that claims firms are already outlawed from engaging in any form of high-pressure selling, including unsolicited electronic marketing and face-to-face ‘cold calling’. It instructs consumers:
“If you are considering a claims management company you should not be pressured into making any on-the-spot decisions, make sure you understand the fees the company will charge, and seek independent advice about making your complaint.”
If businesses do feel they are being unfairly targeted by claims firms, they should inform the claims management regulator.
The guidance goes on to outline the various roles of the different bodies involved, pointing out that consumers can go to the FOS for free to settle complaints.
The Ministry of Justice yesterday published its annual report on claims management regulation for 2010/2011. It reveals that over the past year, it has cancelled the authorisations of 349 claims firms, refused 9 applications from would-be claims firms and suspended 10 firms due to factors such as fraud charges, irresponsible conduct and poor sales practices.