Pimfa has called on the Financial Ombudsman Service to review its approach to case fees, suggesting a 50-50 split between claims management companies and firms.
The adviser trade body argued that while the decision to levy a fee on CMCs is welcome, it believes it will not achieve the policy objectives set out by the government when this power was given to the Fos.
Earlier this year (May 2024) the Fos announced it was making changes to its fee structure to make it a fairer model.
It proposed to charge claims management companies and other professional representatives up to £250 to lodge a case, reduced to £75 if the case outcome is in favour of the consumer.
However, Pimfa argued £250 does not act as a disincentive to bring forward targeted block cases against firms that have little chance of success.
It suggested the Fos should levy a higher charge which would result in firms and CMCs sharing the burden of case fees.
Pimfa suggested a 50-50 split between both parties, meaning respondent firms would be required to pay £450 as would CMCs and professional representatives.
Simon Harrington, head of public affairs at Pimfa, said: “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.
“While 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 trade body said it was “unconvinced” that raising case fees for CMCs would result in consumer detriment given there is little evidence that the use of a CMC results in a demonstrably better outcome for consumers.
It also pointed out the presence of a fee cap for CMCs regulated by the FCA was evidence the case fee would not be passed on to the end consumer.
Harrington believed the Fos had a “unique” opportunity to “be bold” and address the economic imbalance between CMCs and the financial services sector that currently exists.
Pimfa also urged the Solicitors Regulation Authority to accelerate its plans to adopt a regulatory framework for CMCs which mirrors the FCA.
alina.khan@ft.com
