The Personal Finance Society says it has received up to 40 complaints in 1 week about CMC ‘phoenixing.’

The FCA announced today it will seek to ban failed financial services firms from working with Claims Management Companies (CMCs) to target former clients.

A number of failed financial firms have been connected with new Claims Management Companies (CMCs) which try and claim millions in compensation from the Financial Services Compensation Scheme (FSCS).

The FCA says some failed firms have a "relevant connection" to new CMC firms - often set up purely to target former clients. The FCA plans to ban CMCs "phoenixed" from failed firms from submitting claims to the FSCS.

In a response today the PFS, the professional body for 40,000 Financial Planners, Paraplanners and financial services workers, said it had received upto 40 complaints in one week about CMC phoenixing - suggesting the problem is widespread.

Keith Richards, CEO of the Personal Finance Society, said: “Last year I received 40 complaints about the conduct of claims management companies in less than a week and shared this evidence with the regulator.

“The FCA is right to be concerned about individuals connected with a wound-up financial services firm reappearing in connection with a Claims Management Company. Individuals should not be able to financially benefit from their own past conduct, which caused consumers to be out of pocket.

Mr Richards said it was “appalling” that of the 250 claims management companies the FCA regulates with permission to manage financial services claims, at least 18 are linked with businesses that could allow individuals to benefit from their past firms’ poor conduct.

He added: “The cost of poor practices at a minority of claims management companies impacts public trust and pushes up the cost of financial advice. Phoenixing must stop.”

Simon Harrington, senior policy adviser at trade body PIMFA, said: “This is an extremely welcome intervention from the FCA. As we set out in our paper on FSCS reform last year, it is of the utmost importance that the ways in which firms are able to transfer risk onto the FSCS and exploit for their own potential gain should be reviewed.

“This consultation and, we hope, the forthcoming policy statement, is a significant step in addressing this market distortion. While it is step in a much longer journey towards lower levies, it is still extremely welcome and a credit to the FCA that they have listened.”