Context
The FCA’s Smaller Business Practitioner Panel (SBPP) has responded to the Financial Ombudsman Service’s (FOS) consultation of Charging Claims Management Companies and other professional representatives, which was published 23 May 2024.
Key points to note and next actions
The SBPP has expressed its strong support for the proposals to charge CMCs and other professional representatives, due to what it sees as the fairer apportionment of financial responsibility and deterrence of ‘bad actors’, resulting in the potential to achieve better outcomes for consumers.
For the new charging mechanism to have an impact the SBPP believes the maximum fee should be set at a much higher level, as a £250 case fee may not provide sufficient deterrent for CMCs determined to exploit the system. It is also supportive of a lower charge (to the proposed £75) for CMCs where the complainant is successful, which would be consistent with the ‘polluter pays’ principle.
Consideration of possible unintended consequences is encouraged by the SBPP, such as the potential for CMCs to circumvent the charges by coming to an arrangement with the complainant to submit a ‘prepared’ complaint, without taking care to assess whether the case has any merit. There would be no adverse consequence to the CMC, although consumer expectations would likely be falsely raised. A significant case fee of £475 would still be payable by the respondent firm, as well as taking up FOS resource.