CMCs and High Cost Lenders warned on conduct

2 April 2021   By Dr Lucy Brown, Editor

Financial Conduct Authority (FCA) has reminded Claims Management Companies and High Cost Lenders to work better together.

The reminder comes as tensions rise between companies managing claims on behalf of customers and the lenders those claims relate to.

Both sides have a role to play in reducing tensions according to the reminder from the FCA.

Separately, Amigo Loans has been given the go-ahead from the court to put a compensation cap proposal to stakeholders.


FCA reminder

The FCA's warning to Claims Management Companies (CMCs) and High Cost Lenders (HCLs) reminds them to work together to solve disputes in the best interests of their customers.

They also encourage both sides to agree streamlined claims handling processes where possible to further benefit customers.

While they say complaints about CMCs by HCLs usually relate to customers with legitimate grounds for complaint, the FCA remind CMCs:

  • They must not make or pursue a claim if they have good reason to suspect it's fraudulent, frivolous, vexatious or doesn't have a good arguable base
  • They should take all reasonable steps to investigate the existence and merits of a claim before pursuing it
  • Their investigations should enable them to make effective representations when presenting a claim which substantiate it, relate to the claim, are specific to the claim, and are not false, misleading or an exaggeration

These reminders follow a letter sent to CMCs in October 2020 reiterating their obligations.


A list of tensions between the two sides was also supplied, with the FCA noting instances of the following:

  • A CMC having presented a claim while the HCL insists the customer had never taken out a loan with them
  • HCLs suspending lending to customers who have brought complaints while the complaint is being investigating, potentially leading to customers withdrawing their complaints and being charged a cancellation fee by a CMC
  • HCLs have expressed concern that CMCs are using catch-all letters of authority (LoA) to pursue claims against more than one HCL instead of ensuring a separate LoA is agreed for each complaint
  • CMCs have expressed concern that HCLs checking of LoAs may be excessive and deliberately being used to hinder a customer's ability to progress their complaint using a CMC
  • Some HCLs seem unwilling to share information efficiently with CMCs

As this list suggests, there are criticisms on both sides, but with CMCs playing an ever-greater role in advancing customer complaints to loan companies (as the latest figures show), resolving these tensions is key to ensuring customers are protected during the complaints process.

Amigo cap plan

In related news, Amigo Loans have been given permission by the High Court to put a proposal for capping compensation to their customers.

We first covered this plan when it was announced in December 2020, with Amigo hoping to set a cap on compensation payouts to stop the business being overwhelmed by them.

The first hurdle they needed to overcome was permission from the High Court, and they achieved that this week. They will now put the proposal to customers who will have the final say on whether to accept the deal.

Amigo say plainly on their website that if customers vote against the scheme, the business will likely become insolvent and no compensation would be available.

Doorstep lender Provident Financial have made a similar statement on their website as they seek to go through the same process as Amigo.

One notable element of the Amigo case, however, is that the FCA has chosen not to take any regulatory action to oppose the scheme, even though they do not support it.

If Amigo and Provident are successful in steering their plans through customer approval and limiting the amount of compensation available, it seems inevitable other companies will follow if the FCA is declining to step in.

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