The Association of Professional Financial Advisers (APFA) has called on the Ministry of Justice to take “decisive” action over significant concerns that Claims Management Companies (CMCs) are increasingly manufacturing claims.

APFA chairman Lord Deben has written to Secretary of State for Justice Chris Grayling directly to raise the issues identified.

Chris Hannant, policy director at APFA, said: “The best CMCs provide a useful service to consumers that need it. However, we are seeing more and more examples of claims being submitted by CMCs where there was no product or where there is no evidence of any mis-selling. This is fraud. We’re also concerned that the methods being used to obtain new business have become increasingly intrusive.”

APFA is calling for the Ministry of Justice to act more quickly when firms break the rules, including immediate suspension or removal of the CMC’s authorisation when a fraudulent claim is found.

It also wants it to implement higher standards of approval for CMCs, similar to those required for businesses regulated by the FSA. This should include scrutiny of business plans, and checks on the integrity of individuals running firms.

APFA also wants the ministry to double the number of staff devoted to supervising CMCs. This should be paid for by CMCs through their regulatory fees, it says.

Hannant added: “Fraud should be treated as the crime it is. The Ministry of Justice needs to take tougher action. Advisers should report any bogus or fraudulent claims straight to the Ministry of Justice. We are also asking that they let us know so we can collect evidence of wrongdoing to keep the pressure on.

“Advisers should also tell clients that they do not need to use a CMC – neither the Financial Ombudsman Service (FOS) nor the Financial Services Compensation Scheme (FSCS) will charge consumers a fee if they want to make a claim.”