The BSA said bogus claims regarding mis-sold Payment Protection Insurance (PPI) have rocketed in the past six months, up 247%.
The Ministry of Justice (MoJ) recently announced it was targeting this sector, but a recent Mortgage Solutions poll found that the mortgage industry was sceptical about its ability to crack down on fake claims.
Now the BSA has called for the MoJ to be given greater powers, saying that the mutual sector does not believe rogue CMCs will comply with existing legislation.
The BSA says that its members are still being burdened with time-consuming investigations of bogus claims, often regarding products which the mutual did not sell to the claimant.
It is now asking that the regulator is given the power to impose fines for bad practice, and strike off repeated rule breakers. It should also be made easier for consumers to complain about mis-selling by CMCs, the BSA says.
Adrian Coles, director-general of the BSA, said: “The Ministry of Justice warning in August 2011 was clearly ignored. If anything some claims management firms have stepped up their irresponsible, speculative scattergun approach to non-sale claims.
“We have little confidence that their latest communication will have any effect either. Much stronger action is needed if these companies are to stop misleading consumers and putting a pointless and growing administrative burden on BSA members and the Financial Ombudsman Service.
“It is clear that the Ministry of Justice simply does not have the powers that it needs to effectively control the rogue elements in this industry. They do not even have the power to fine.
“Looked at from the perspective of our highly regulated sector some claims management companies look remarkably like the modern day equivalent of highwaymen.”
Chris White, chief executive of Hinckley & Rugby Building Society, added: “Just in the last three months we have had 32 complaints of mis-selling of mortgage payment protection insurance (MPPI) but only one was from a customer who had an MPPI policy with us.
“People are simply trying their luck by complaining either directly or via a claims management company. I think they must simply hope that this shotgun approach will yield something from building societies or banks who might be tempted to pay up without investigating.”
“The problem with these bogus complaints is that our duty is to investigate each one within the Financial Services Authority rules as though it was genuine. That is a burden on the Society in terms of time, cost and staff resource.”
