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Desmond Hudson said that the government ‘should make the practice of CMCs unlawful’

A number of online blogs and articles, including one in The Law Society Gazette, are reporting that the Chief Executive of the Law Society [Desmond Hudson] has publicly called on claims management companies [CMCs] to be outlawed. Putting the comment into context he was, at the time, giving evidence to a House of Commons transport committee, which is currently investigating the cost impact on motor insurance from whiplash claims. Clearly, the Select Committee was investigating a narrow issue within a narrow claims area, but the suggestion from someone who represents firms who represent others is surprising.

The right to representation from CMCs

The mere thought of someone in any dispute not being able to be represented or having a free choice in who represents them appears to go against the rules of natural justice. In this Country, we are used to processes where a person at the centre of a dispute can ask others to represent them. Most people will be aware of such procedures in a wide range disputes from employment disciplinary disputes to tribunals held within Her Majesty’s Courts and Tribunals Service. I doubt the Chief Executive of the Law Society would argue against consumers being legally represented, but the suggestion that CMCs should be outlawed could drive those requiring representation into the hands of law firms who dabble with claims representation and are not specialists at it.

The issue – Financial Claims Management is a specialist area

No one will doubt that lawyers are experts in matters of the law. In respect of claim disputes, it seems right that where someone has chosen to be represented they should be free to choose a specialist firm who understands the area in dispute. Within the financial claims sector there are a number of different claims areas. Claims management companies often specialise in one or more of the areas where products have been mis-sold. These include endowment policies, pension plans or transfers, mortgages, care home products and, of course, payment protection insurance – to name but a few.

It seems to me that most customers who decide that they want to be represented would rather choose a specialist firm and not a ‘dabbler’.

So what is the answer?

By suggesting that CMCs should be banned Mr Hudson seems to submit, by association, that all CMCs adopt unethical practices; why else would he want them banned? There are, of course, rogues within the CMC sector, as is the case in any business area. However, CMCs are already regulated and the Claims Management Regulator [CMR] is already shown that it has teeth. In the first quarter of 2013 CMR conducted 38 audits, commenced 7 investigations, issued 40 warnings, obtained 1 undertaking, cancelled 2 licences and suspended 1 licence. The CMR now publishes, on its website, details of enforcement actions it has taken against the claims management companies they regulate. It also identifies those companies under formal investigation for potential breaches of the Conduct of Authorised Persons Rules 2013. So it seems to me that the answer is not to ban CMCs (there would be a risk of consumer detriment if such organisations were banned) the correct course of action is to work with the Claims Management Regulator to drive up standards and eliminate poor practices.

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The Benefits and Services of the Professional Financial Claims Association are intended to extend beyond its own membership. The Financial Claims Management sector needs a credible ‘voice’ at a time of change and increased scrutiny within the sector.