The Financial Ombudsman Service (FOS) has been urged by PIMFA, the trade association representing the wealth management, investment services, and financial advice and planning industries, to improve the playing field.
This mainly refers to the gap between financial services providers and Claims Management Companies (CMCs) and improving it by utilising the opportunities provided by the Financial Services and Markets Act.
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PIMFA contends that although the decision to charge CMCs a fee is noble, it will not accomplish the policy goals outlined by the government when this authority was granted to the FOS in its response to the FOS Consultation on “Charging Claims Management Companies and other Professional Representatives.”
According to PIMFA, the £250 ($317) case fee for CMCs and Professional Representatives does not serve as a deterrent for bringing forward targeted block cases against low-probability enterprises.
PIMFA responds by recommending that FOS reevaluate its strategy and try to charge a greater fee, which would cause businesses and CMCs to split the cost of case fees.
Moreover, PIMFA proposes a 50-50 split between the two sides, indicating that respondent firms, as well as CMCs and professional representatives, would have to pay £450, assuming a case charge of £900 as stated in the consultation proposals (£250 for the CMC and £650 for the respondent firm).
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By GlobalDataPIMFA thinks that by doing this, the FOS will be able to present a framework that is fairer to respondent firms and acknowledge the restricted role that CMCs have in pursuing consumer disputes.
Given the lack of proof that using a CMC produces a noticeably better outcome for consumers, PIMFA is not persuaded that boosting case fees for CMCs would be detrimental to consumers.
Additionally, it would use the FCA-regulated CMCs’ charge cap as proof that the case fee would not be passed on to the final customer.
In light of this, PIMFA would also encourage the Solicitors Regulation Authority (SRA) to move more quickly toward adopting a CMC regulatory structure that is similar to the FCA.
Simon Harrington, head of Public Affairs at PIMFA, stated: “We would never advocate for the FOS to be anything other than free of use for consumers. It plays a valuable part in the financial services ecosystem, and we will always defend the right of consumers to access it.”
“In accepting the principle that the FOS is and should always remain free to access for consumers, we find ourselves questioning why it is that CMCs should be able to insert themselves into a process for their economic benefit where there is little evidence to suggest that their presence is in any way contributory towards consumers receiving a good outcome.”
“Whilst we are pleased to see that the FOS has accepted the principle that CMCs and professional representatives should be required to contribute towards case fees which they bring forward, we strongly believe that the FOS should review its proposals in order to set out a more equitable settlement between CMCs and respondent firms.”
“The FOS has a unique opportunity here to be bold and address the economic imbalance which currently exists between CMCs and the financial services sector. In doing so, the FOS can set out a framework which is equitable for firms and recognises the roles of both parties as ‘customers’ of the FOS.”
