Like malignant locusts, claims management companies are the financial services equivalent of a biblical plague. They have multiplied, mutated, grown fat and spread principally due to the interminable PPI saga and, like other parasites, they search anxiously for targets anew when their current host shows signs of decline.
Collectively they may be lower than a weasels belly but they do exhibit a form of primitive nous which is best characterised by their ability to appeal to the baser natures of the weak, greedy and opportunistic. They have readily grasped that dubious advertising entreaties are capable of encouraging complaints from the avaricious and the unwitting and they know that, like flinging mud at a wall, some of it will stick.
More importantly they know how to play the system, how to use the Financial Ombudsman Service and the FCA rulebook, both of which contrive to allow such abuse. Consequently CMCs persistently threaten to escalate complaints to the ombudsman, frequently using invective.
The FOS is free for consumers (and those standing behind them) and enables CMCs to toss cases at the FOS with impunity. They know there is a chance that files may have gone astray and they also understand that the FOS’s inquisitorial remit greatly increases the chance of a win. Moreover they are aware that the quality of adjudications is frequently deficient which serves to make it a pretty good gamble. After all, we would all like a bookmaker to offer free bets with a better than 5/2 chance of winning.
A further unsavoury aspect is that CMCs can embellish, invent, lie and practice all manner of deceit without any prospect of censure. The MOJ seems powerless to stop these antics and the FOS will never accuse the claimant or the CMC of lying. Nor will it report them to the fraud squad as it states that such actions are not within its remit.
All of this places pressure on firms to pay up rather than absorb the costs of investigation, regardless of the complaints merit. This particularly applies to networks as their members, unlike directly authorised firms, will not benefit from the FOS’s 25 annual ‘free’ cases.
Many CMCs advertise for investment, pension and mortgage mis-selling cases using ambiguous phraseology which is designed to capture as many responses as possible.
These often home in on the defunct direct sales firms in the knowledge that files may have gone astray – in other words, easy pickings. The mortgage focus is on the closed sub-prime and self-cert lenders where a potential lack of files, and the possibility that the introducing broker is long-gone, makes the prospect of success a tad higher.
The latest example of artfulness is use of the Data Protection Act.
One adviser recently received two Subject Access Request demands for clients’ mortgage files, each accompanied by a cheque for £10. This is a blatant example of ‘fishing’ where the CMC aims to find some error within the file or some piece of evidence that can be used to instigate a complaint.
This particular CMC takes an upfront fee (which it states as refundable if the claim fails).
I am aware that the MOJ takes a dim view of upfront fees and this action, in combination with the unashamed trawling for non-suitability, should indicate that punitive measures are required. Over to you, MOJ.
Alan Lakey is partner at Highclere Financial Services