Missing link in the consultation
The Claims Management Regulator [CMR] fee capping consultation [Cutting the costs for consumers – Financial claims] gave claims management companies [CMCs] very little time to respond to what was regarded by many to be the most significant Consultation Paper issued by the regulator, they now await the outcome with concerns. The CMR, rightly, called for robust evidence based responses to the consultation. As it stated in the Consultation Paper, “It has not been possible to monetise some of the identified impacts as sufficient data or estimates are not available”. This ‘impact’ is the missing link in the consultation. Laudable as the objectives are (eliminating the nuisance end of the CMC sector) consumers would be poorly served if the proposals limited the choice of routes to justice.
Helpful evidence based – Unhelpful ‘knee jerk’
The CMR, no doubt, has its work cut out. Apparently, there has been over 140 responses. It’s typically the cases in these situations where responses can be put in two piles, the good and the bad, the helpful and unhelpful or the evidence based and ‘knee jerk’. A look at some of the responses published on various organisations websites show this consultation to be no different.
Some threaten legal action – probably unhelpful
There are responses that threaten legal action. Although there are significant legal issues with the proposals (particularity the maximum harmonisation nature of EU consumer law set out in the Unfair Consumer Practices Directive or the Consumer Rights Directive) such threats are probably unhelpful before the outcome of the consultation is even known.
BBC Money Box programme 15th April
There are responses that simply support the proposals on the basis of ‘let’s drive these parasites out of business’ to paraphrase the APFA [Association of Professional Financial Advisers] on the BBC Money Box programme 15 April 2016 There are responses that support the proposals, but that fail to assess the negative impact on consumers if professional CMCs are put in a position where they cannot exist. I find such an approach bizarre and shallow. Although such a ‘knee jerk’ response was probably expected it is odd that any organisation that should have consumers at the heart of its thinking did not bother to assess the impact on consumers. If the proposed cap led to the demise of professional CMCs who were then not around to support consumers who seek help with claims or perform the required checks and balances on product providers. The bottom line is the CMR consultation was clearly a ‘call for evidence’ and it should only be responses that provide such evidence that make it to the good, helpful pile.
Carol Brady Review –Claims management regulation
Decision makers clearly now have a difficult task. It appears that thinking consumerists see the value in a professional compliant CMC sector. As Carol Brady states in her review of the CMC sector “It is important to note that CMCs provide access to justice for a wide range of consumers who may be unwilling or unable to bring a claim themselves. A well-functioning CMCs market can also act as a check and balance on the conduct and complaint handling processes of businesses, thereby benefitting the public interest. The overwhelming majority of stakeholders, including the banking and insurance industries which have been hardest hit by CMC misconduct, argued that there is a legitimate need for CMCs and that the Government should not seek to regulate them out of existence.” There is no doubt that the Carol Brady work will have the desired effect on the nuisance/rogue end of the CMC sector. Such firms will not cope with the switch of regulator, the ‘senior managers regime’ (which even banks are struggling with, reauthorisation, greater accountability and better signposting etc). It would be ironic and a poor consumer outcome if the Carol Brady objective of not regulating professional CMCs out of business become the unintended consequence of the ‘fee capping’ consultation.