|
Claims management companies (CMCs) help consumers file
complaints with the Financial Services Compensation Scheme (FSCS)
and take a slice of any cash awarded.
The Financial Conduct Authority said that in one example of
phoenixing it took action against the head of a financial advice
firm that had provided inadequate service to consumers.
After the person was barred from acting as a company director
his wife set up a CMC, which claimed more than 5 million pounds
from the FSCS against her husband's former financial advice
firm.
The watchdog is proposing to ban a CMC from managing FSCS claims
if a person connected to the CMC is or was linked to the
financial services activity that is the subject of the claim.
Consumers don't need to use a CMC to complain to the FSCS, but
many do so for the convenience.
The FCA said an estimated 1,319 claims over six year to the FSCS
involved phoenixing, with a total of 3.7 million pounds paid out
per year. The claims cost consumers on average 11,000 pounds per
claim in CMC fees and other costs.
PIMFA, a trade association for the investment and financial
advice industry, said the proposed ban would stop the transfer
of risk onto the FSCS, and in the longer term help to lower the
fees the FSCS charges on the financial industry to pay
compensation on claims.
In January the FCA consulted on a proposed a price cap on CMC
fees.
(Reporting by Huw Jones; Editing by Alex Richardson)
[© 2021 Thomson Reuters. All rights
reserved.] Copyright 2021 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
