Claim management companies are increasingly targeting mortgage sales as a source of complaints against financial services firms.
Claim firms are thought to be focusing on the suitability of an initial mortgage sale in a bid to bring more complaints. Money Marketing is aware of at least one major high-street bank where the complaints department has seen an increase in mortgage complaints involving a claim firm challenging whether a mortgage was missold.
The Association of Mortgage Intermediaries has also noted an increase in mortgage complaints from claim firms, particularly during the past six months.
AMI director Robert Sinclair says: “We have seen claim firms moving into fishing expeditions, which we find a particularly abhorrent practice.” According to Sinclair, during these fishing expeditions, firms request all the records held on a particular customer, despite the customer having no specific complaint. They bring in customers initially through advertising which claims borrowers may have been missold their mortgage and they can get customers’ mortgages written off. Firms then use client files to search for anything that could be brought as a complaint.
Sinclair believes missold mortgages are being seen by claim firms as the next potential boom market for complaints.
He says: “The issue of bank charges has gone away. Generally the issue of payment protection insurance complaints has gone away because most banks are undertaking full past business reviews with a view to consumer redress. But claim firms have got these vast engines they need to feed and are desperate to find anything that might work.”
AMI has already referred the matter to both the Ministry of Justice and the Solicitors Regulation Authority, as solicitors sometimes offer claim management services.
Sinclair says: “We will pick up specific firms where we believe we are seeing things that are inappropriate. The MoJ has removed quite a number of firms over the past couple of years on the basis of intelligence received and we will continue providing that intelligence.”
The Claims Standards Council, a trade body for the claim management industry, says it is aware of a focus on mortgage complaints by claim firms.
Policy director Andrew Wigmore says: “It is an exploration of the market, where firms explore other financial products that have been ’missold’.”
He says this is speculative activity from a small number of firms. He says: “We are aware of it and it is something the Ministry of Justice has been monitoring to see if there is a trend and to see whether other companies move into this area.”
The FSA, the Claims Management Regulator, which is part of the MoJ, the Financial Ombudsman Service and the Financial Services Compensation Scheme jointly published guidance in July reminding consumers they can go to the FOS for free to settle complaints.
It also pointed out that, in some cases, claim management companies can charge up to one-third of the total compensation awarded.
In upheld cases, where the terms of the loan are altered in place of compensation, it is up to borrowers to find the money to pay for the claim firm’s services.
Chadney Bulgin mortgage partner Jonathan Clark says the trend for claim firms to generate mortgage complaints is worrying.
“I think a good IFA who has carried out the full advice process is less likely to receive complaints but the fear is that if we rebuff a complaint, a claim firm might write to us saying ’just pay up, otherwise you are going to have to pay the £500 FOS case fee’,” he says.