New report criticizes CMCs

29/10/2009

The government believes that one in four claims management Companies (CMCs) are breaking industry rules.

Analysis from the Ministry of Justice suggests that firms have committed a number of breaches such as misleading customers, the Daily Mail reported.

CMCs commonly charges large up-front fees to customers in giving them the chance to launch legal action against their credit provider.

These claims attempt to wipe out card and loan debts, on the basis that their original contracts are unenforceable.

Fees for the service can reach hundreds of pounds, despite the fact that the claims themselves are unlikely to succeed.

Moreover, many firms are thought to be giving misleading statistics to the borrowers about their chances of ultimately being successful.

The newspaper has also uncovered cases of mistreatment by the companies.

For example, one customer who paid a fee to a CMC failed to get her debts wiped out and is now not even having her calls returned.

"Many who signed up with these firms have become exasperated because their claims have been lost in limbo," the report added.

A recent ruling from a High Court judge has tightened the screw on CMCs still further.

The decision stated that loan and card providers were allowed to tell credit reference firms about missed repayments from a customer - even if this individual was using a CMC to dispute their debts at the time.

This means that overall credit scores can be damaged no matter what the outcome of the case.

The Ministry of Justice has also cancelled over 100 CMCs for breaking industry rules.

Tags; Income Worries and Debt, Credit Card Lifestyle,

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