The call comes after a summit held last month debated ways of improving confidence in the Payment Protection Insurance complaints system.
The letter said: “This is a large scale issue, with almost £9bn provisioned by institutions and affecting millions of consumers.
“We agreed that more needs to be done to help those who have been mis-sold PPI, and together have committed to further action.
“However we also believe the Government has a critical role to play to help consumers and the industry by ensuring third party complaint handlers are properly regulated and bad practice is stamped out.”
Martin Lewis, founder of MoneySavingExpert.com, Angela Knight, chief executive of the BBA and Peter Vicary-Smith, chief executive of Which? said they acknowledged the recent steps taken by the Ministry of Justice – for which Kenneth Clark is secretary of state - but said “further action is urgently needed”.
They said: “There is significant evidence of rule breaking within the claims management sector, an industry that has grown significantly, and we believe that regulation and supervision of it has not kept up.”
Recent research from MoneySavingExpert.com and Which? found that a quarter of people did not know that CMCs take a fee and only half knew that using a CMC would be no more successful than making the claim themselves.
They said the result is that consumers are losing out now and will continue to do so unless action is taken.
“Misleading advice, unfair contract terms and a lack of transparency about fees are all too common and there is very little consumers can do to gain redress when they occur,” they added.
It is likely that the bulk of the money being set aside for PPI redress will be distributed over the next year making it essential that urgent action is taken to “encourage better supervision, self-regulation, tighter regulation and enforcement action against CMCs by the Ministry of Justice”.
The three also expressed concern that the proposed consultation by the claims management regulator on the Conduct of Authorised Persons Rules is being delayed.
And they added: “Any delay in bringing forward much needed changes to help drive out the poor practice of some CMCs will only lead to further consumer detriment and additional costs across industry and the Financial Ombudsman Service.
“In light of our concerns, we would like to discuss this matter with you [Kenneth Clark] further and will be in touch with your office to request a meeting.”
