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Categories:Advisers,Regulation

Half of FOS complaints come from claims firms

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Claims management companies accounted for nearly half of all cases received by the Financial Ombudsman Service during 2011.

Figures cited in a review of the FOS by the National Audit Office, published today, show claims management firms generated 45 per cent of FOS cases last year, compared to 43 per cent of cases that came directly from consumers (see table below).

The number of complaint cases referred by CMCs to the FOS is up 17 per cent on 2010, when 28 per cent of cases came through claims firms, and 27 per cent since 2007, when claims firms accounted for 18 per cent of cases.

The bulk of complaints from CMCs last year related to payment protection insurance complaints.

The NAO review also notes that FOS operating costs have risen 214 per cent in real terms over the last nine years from £27.2m in 2001/02 to over £100m in 2010/11. The growth in the number of cases converted to complaints grew 376 per cent over the same period from 43,330 cases to 206,121.

In 2010/11 the industry paid a total of £122m to cover the costs of the FOS, made up of £77m in case fees, £20m through the FSA industry levy, and a further £2m to boost the FOS’ reserves to cope with the surge in PPI complaints.

The FOS is falling short of its target to resolve half of cases within three months, with only 41 per cent of last year’s cases resolved in this time. A further 40 per cent of last year’s cases were resolved withing three to nine months, while 5 per cent of cases took over 18 months to resolve.

The NAO recommends the FOS should do more to understand the reasons for delays within the complaint-handling process, and work out the maximum number of cases staff can work on at any one time.

It also recommends the FOS should examine whether its current charging structure is “fit for purpose”, and consider charging firms when an enquiry to the FOS is converted into a complaint to be investigated, rather than when the case is resolved.

The FOS published a consultation paper last week on reforming its case fee structure from April 2013.

It has proposed increasing the number of free cases firms are allowed before they have to pay a £500 case fee from three to 25 a year. Larger firms with over 2,000 complaints referred to the FOS a year would not qualify for the free cases, and would instead to be subject to a different charging structure reflecting the amount of the FOS’ workload they generate.

Separately the FOS is planning to increase staff numbers by a third to 2,545 and is forecasting a 75 per cent jump in operating costs from £113.1m for 2011/12 to £197.6m for 2012/13.

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Readers' comments (12)

  • If an IFA/ firm has to pay a case fee to FOS for their review then surely the same should apply to a claims firm. This would of course not stop an individual from making a personal claim but might help to cauterise the increase in ambulance chasing!

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  • Something needs to be done about our 'claim' culture which is getting out of hand, thanks to all the ambulance chasers who disgust me. On a weekly basis I receive texts and phone calls encouraging me to complain....about one thing or another.
    In these tough times, I'm afraid people will take up the offers in the hope of making money.

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  • Claims firms are the scurge of society and need driving out of business full stop. Look in the press re whisplash claims they are creating problems not fixing them.

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  • I agree with you John. I have no problem with genuine complaints we are all human and have all at some point in time made an error of judgement.
    We have received a complaint in the last few days that has taken time to investigate and respond to. Of the five reasons for complaint, not one fitted the features of the product a PEP sold in the mid-nineties. A plan that had been reviewed until the client chose a different adviser in 2006. One of the reasons given by the CMC is "The investor was not made aware that they could not access funds in an emergency. This was contrary to their requirements". This is a PEP now ISA with no restriction on access. The funds are well above the amount invested and above the amount if in a building soc account over the same period.
    A total waste of time and effort and misleading their client in to thinking they will benefit in some way by entering in this claim.
    Not only should the CMC pay a fee, the client should pay a "refundable on success" fee as well.

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  • Radio 4 did a piece this morning on the increase in car insurance premiums due to claims management firms encouraging individuals to make (probably spurious) claims for whiplash injuries. A Parliamentary Committee is currently looking into it, so perhaps a similar investigation should be carried out in the case of "CMC" generated complaints to FOS? In the end, the consumer ends up paying for it all, one way or another.

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  • Only two days ago I had an unsolicited call from a witheld number fishing for business for PPI claims, they had the right surname, but this was just about all, they quickly ended the call once they found out what I do for a living. These firms are buying telephone numbers and calling them all in the hope of getting business,and in these hard pressed times it is no wonder that people will be tempted to try and claim, even when they did need the cover and it had been properly sold.

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  • I have no problem in supporting genuine compensation arrangements to cover failures and poor business practices. However -

    These vermin have no hesitation in encouraging specious claims which, even if they can be disproved and rejected, cost us all a gret deal of time and, in the context of the FSCS, more money to pay for an inflated staffing level.

    If you happen to meet one, be sure to tell them what you think of them and their grubby business.

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  • It is appalling that the FOS seem to welcome what amounts to fraudulent claims from claims chasers. Very few complaints are tailored to the individual but simply state all the reasons that could possibly qualify for a complaint. Therefore unless all complaints are identical (which they are not) this is fraud & the companies should be prosecuted by the police & the FSA & FOS should have nothing to do with them unless the company can show they are reputable & ethical.

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  • I was unfortunate enough to end up standing next to "a sales team" from an ambulance chaser firm on their way home last night. Their (very loud!) conversation centred on boasts about their "hits" that day as well as sharing new (often under-handed) tactics to improve sales figures, as targets were not being met.

    The "team" appeared to be all in their teens/early twenties, only paid commission and apparently were not on permanent employment contracts. No question, telesales at its worst.

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  • Almost every day this year we have received a minimum of two unsolicited automated calls, which we slam down. However John Hutton is quite correct in commenting we as IFA's are charged after so many claims are made. Let the ambulance chasers take responsability and make them pay likewise.
    Two years ago a claims company tried it on with one of our advisers and the hours involved in writing to and fro is rediculous. However the case was declined and the ambulance chases put the case to bed. I should have charged them for time spent! That would have made them think again!

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