The FCA has fined two CMC companies recently since taking over the regulation of claims firms.
Advisers, concerned that CMCs are turning their focus to the advice sector after the ending of PPI claims, have accused CMCs of time wasting and vexatious claims.
The PFS says there is evidence of claims management companies issuing ‘blanket calls’ for cash or escalating the complaint to the Financial Ombudsman Service, despite a financial adviser having evidence the claim is without foundation.
One adviser had evidence of a claims management company issuing blanket complaints on annuity sales on behalf of clients, without bothering to check whether what the allegations applied to specific clients.
The CMC alleged that a client was not given the open market option of a joint life annuity or guarantee period when the client actually purchased a joint life annuity with a 10-year guarantee period via the open market option.
The adviser, who wished to remain anonymous, said: “The claims management companies should be required to provide evidence of what they allege as they waste so much time without any responsibility for their allegations.”
Another financial adviser was able to show the CMC how their client was financially better off because of their recommendation.
Despite this evidence the CMC still referred the complaint on to the Financial Ombudsman Service, which concluded the advice was suitable.
Keith Richards, chief executive of the Personal Finance Society, said: “Claims management companies claiming their work is ‘no win, no fee’ are misleading and this sort of practice needs banning.
“The cost of poor practices at a minority of claims management companies also impacts public trust and pushes up the cost of financial advice.
“Financial advisers are understandably unhappy that claims management companies that throw mud at walls and in the hope that some will stick face no financial penalty when they fail to win a claim.
“The Personal Finance Society will share the evidence uncovered of poor practices at claims management companies with the Financial Conduct Authority and flag how the current system is unfair and results in consumers picking up the tab for claims without foundation.”
Earlier this month the Personal Finance Society announced it was collecting evidence of poor practice among claims management companies that will be passed to the Financial Conduct Authority.