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CMC charges capped at 20% by law effective July 2018

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In fact the new regulation is even more interesting than the post above suggests.

 

There is a cap of 20% – but in fact the rule is that the CMC's are only allowed to charge "reasonable" fees are not only that they are required to provide a detailed breakdown of the work they have carried out so one can then decide what is reasonable.

 

I'm quite sure that many CMC's will simply charge the – 20% of recovered premiums. If you discover that in fact that they only send one or two letters and did very little else than I would suggest that 20% would normally be very excessive.

 

I think it is now possible to hold CMC's to account and refuse to pay the bill until you have a complete breakdown of the work they have carried out.

 

What a shame that this is come so late in the day – when the arbitrarily imposed time limit for claims is next year.

 

Incidentally, in terms of the time limit for claims, this simply relates to claims made directly to the lender and then to the FOS. In fact if you find that there is some good legal reason for saying that the PPI was mis-sold to you then you may well have good case to go to court – and it could well be worth doing.

 

For instance, if you have evidence that the PPI was sold to you because you were misled into it then you probably have six years to bring your claim in the courts from the date that you became aware or should reasonably have become aware of the misrepresentation.

 

1. Financial Guidance and Claims Bill: interim fee cap

 

On 21 November 2017, a Government amendment was passed in the House of Lords at Third Reading of the Bill providing for a cap on fees that CMCs and legal services providers can charge claimants for claims management services in relation to PPI claims.

The Government has decided to legislate for a cap in advance of the Financial Conduct Authority (FCA) taking over responsibility for claims management regulation and to set this cap at 20% (excluding VAT) of the claim value. The intention is that the cap would be introduced two months after the Bill receives Royal Assent which, subject to Parliamentary approval, is expected to be by March 2018. This interim cap would remain in place until the FCA exercises its own fee-capping duty under Clause 17 of the Bill.

The fee cap will be enforced by the CMR in respect of CMCs and the legal service regulators in respect of law firms. The Financial Guidance and Claims Bill will now be passed to the House of Commons for consideration. The progress of the Bill can be followed on the Parliament website where you can sign up for email alerts.

 

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2. CMR consultation response: rule changes to be implemented from April 2018

 

On 15 November, we published the consultation response in relation to proposals first outlined in 2016 to place restrictions on the level of fees that regulated CMCs can charge for financial services claims.

The report explains how the responses received informed our conclusions, and announces the intention to implement the following measures via changes to the Conduct of Authorised Persons Rules 2014:

 

 

  • Fees must not be charged to a client prior to the conclusion of a PPI claim. Fees for any other financial products and services claims must not be charged prior to the provision of any regulated claims management services (excluding advertising for, or otherwise seeking out) to the client.
  • A ban on any charges to a client where it is identified that the client does not have a relationship or relevant policy with the lender(s) for which a claim is submitted on their behalf.
  • CMCs will be required to ensure all charges are reasonable and to provide clients with an itemised bill setting out details reflecting the work undertaken and what the charges relate to where a contract is cancelled after the 14-day ‘cooling off’ period.
  • Amended Client Specific Rule 16: A business, unless subject to Regulation 8 of the Damages Based Agreements Regulations 2013, must permit the client to cancel a contract at any time. Any charge to the client must be limited to what is reasonable and must reflect work undertaken by the business. Where there is a contract for a financial product and services claim the business must provide the client with an itemised bill that evidences the regulated claims management services provided and how the fees have been calculated before obtaining payment details and before any payment can be taken.

The new rules will come into effect on 1 April 2018. All CMCs offering financial claims services in England and Wales are required to adhere to these rules as a condition of authorisation in accordance with Regulation 12(5) of the Compensation (Claims Management Services) Regulations 2006. Failure to adhere to the rules would be subject to enforcement action.

Further guidance will be issued in due course on the implementation of the interim fee cap and the above rule changes.


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The new rules are not retrospective so they only apply to contracts agreed with a CMC after the start date which is apparently 10 July of this year – 2018


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