Good to know: You do not need to use a claims management company to make your complaint to a financial services company. If a complaint is not successful you can refer it to an Ombudsman service for free. If a financial services company has failed you may be able to refer the claim to the Financial Services Compensation Scheme for free.

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The Importance of Choosing the Right Pathway for Your Claim: CMCs and Law Firms Compared.

Posted on 28 August, 2021 by Andy Ramsey

The Difference between Law Firms and CMCs.

There is an out-dated myth that Claims Management Companies (known as CMCs for short) are cowboys. Until 2008 there was no regulation of CMCs. At that point, anyone could set up a CMC and there was no applicable oversight of CMC activity. However, following good work by the Ministry of Justice (Claims Management Regulator) and more recently, the FCA, the picture couldn’t be any more different. CMCs operate in a highly regulated under the supervision of the FCA. Modern CMCs are usually sophisticated businesses with corporate governance structures.

The truth is that following numerous legislative changes, many CMC’s offer a highly professional service with a deep and technical understanding of the claims process. CMC’s have helped raised awareness of financial mis-selling and helped millions of people who would otherwise not have pursued a claim. CMC’s are highly regulated and fall under the jurisdiction of the Financial Services watchdog, the FCA. The FCA’s role it is to ensure financial firms treat customers fairly and prevent market abuse.

So, what are the differences between using a CMC and a Law firm?

There are some important differences.

When deciding who you wish to use, you first need to decide what path you are comfortable in taking your claim through. Principally, whether this is an alternative dispute resolution service service (ADRS) such as an ombudsman, or the more formal approach of litigation which may involve going to court.

Whilst some CMC’s advertise services on behalf of law firms, others such as Allegiant have permission from the FCA to handle claims themselves using ADRS services. This means we will not take a claim to court but instead use an ADRS. ADRS have the power to force a Respondent to pay. For example, as at 2021, the Financial Ombudsman Service can make binding awards up to £350,000.

Litigation or Ombudsman

Solicitors may decide to pursue a claim via an ADRS such as the Ombudsman, or via court  litigation. It is true that this approach allows them more options in pursuing the claim, but there are risks with litigation. Litigation can lead to significant legal costs which the loser of a claim usually has to pay. Law firms can obtain insurance for costs risks, but insurance is never a guarantee and it is very important to check the funding arrangement and cost liability provisions of a law firm’s retainer. You may have to go to court and give evidence, and could get involved in long drawn-out litigation. This is certainly not always the case, but its a possibility. Court decisions might not be acceptable to either party and if the claim is unsuccessful, you may be liable for considerable fees, although the solicitor should take out some form of funding arrangement to protect you. You could also be forced to settle the claim if the solicitor feels the cost risks to them is too great.

A further fundamental distinction between an ADRS such as the Financial Ombudsman Service and the Courts, is that in Court a judge has to follow the law, which is narrow, very specific and technical. CMC’s only pursue the claim through a recognised ADRS, which are free services and which do not saddle the loser with litigation costs. The Financial Ombudsman Service is an informal alternative to the courts and decides cases on “a fair and reasonable basis” which means fairness is a key part of its decision making process, not just the technical confines of the law. In considering what is fair and reasonable in all the circumstances of the case, the Ombudsman will consider the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate, what it considers having been good industry practice at the relevant time as well.

The decision an Ombudsman comes to may differ to what a court would decide applying legal rules.

If you wish to claim via an ADRS (Ombudsman) path, CMCs can help. Law firms can also help – but it is vitally important to speak with the law firm to determine which pathway they propose to use for your claim before you sign up.

There is no need to go to Court where a claim is suitable for an Ombudsman service.

Unlike a court, you generally don’t need anyone to represent you. If you’d prefer, FOS or FSCS can talk to a member of your family, a friend or someone else like a CMC, who you’ve asked to help you complain. You also don’t need to make your case in person. And there’s no “cross-examination”, where both sides ask each other questions. Instead, FOS sort things out over the phone, by email or post – depending on what suits you. If the claim is unsuccessful, you still have the option of taking the claim to court, if it is still in time to do so.

Why Choose Allegiant

We are always keen to point out there is no requirement to use a CMC to make a complaint to a respondent. If a respondent rejects a claim you can take it to an applicable Ombudsman service for free (time limits do apply). However, many prospective claimants prefer to have a CMC by their side. If you would prefer professional claims assistance we would love to help.

  • Allegiant is a well-established CMC who has successfully recovered over £50 million compensation for its customers.
  • We have extensive experience with dealing with FOS and FSCS and understand what is needed to present your claim in the strongest way possible.
  • Our fees are some of the lowest in the market in all sectors that we operate in.
  • We have friendly and helpful staff on hand if you need help in any part of the process.
  • Quick and simple online enquiry process, without the need to speak to a person, although that option is also available.

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Disclaimer:

Good to know: You do not need to use a claims management company to make your complaint to a financial services company. If a complaint is not successful you can refer it to an Ombudsman service for free. If a financial services company has failed you may be able to refer the claim to the Financial Services Compensation Scheme for free.