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Alan Lakey: Too easy to set up a claims firm

This week I refer back to previous articles – one regarding CMC fraudsters and another on the current illogic that infects the mortgage world.

Intrinsically I have no gripe with CMCs, well, not much, and they do serve a purpose of sorts as there will always be consumers that prefer to leave such matters to others and accept the financial cost of doing so.

What enrages me is the ability of scurrilous firms to level unfounded complaints which, despite the tangle of invention and defamation, frequently find their way to the FOS, where the outcome becomes something of a lottery.

CMCs are fully aware that the FOS represents a no cost opportunity to hit the jackpot. The FOS dutifully ignores invention and outright lies and searches assiduously for some area of deficit or neglect, for some means by which the complaint might be upheld.

This is a view born not from ignorance but from the experience of viewing hundreds of adjudications and probing the mindset that informs the outcomes. The interaction of the FOS is as much part of the problem as the CMCs because, without its potential involvement, the gravy train would be derailed.

The FOS frequently ignores information that should lead t to reject a complaint, such as proof of a complainant or CMC lying or the automatic slinging of a succession of standard allegations.

In behaving this way the FOS is failing both the consumer and the industry. The consumer is led to believe that financial firms are fair game and that they might luck onto a bonanza, whereas the industry resents the FOS and its FSA derived rules which allows it such latitude.

One alarming aspect is the ability of totally inappropriate individuals to operate, officially or otherwise, a CMC.

Currently £950 is all it takes to start a CMC with no exam requirements, suitability checks or past experience requirement. The MOJ needs to filter out these and other rogues before they create further havoc.

On numerous occasions I’ve stated that mortgage underwriting has lost all connection with reality and have previously lambasted Abbey for idiocy. That’s not actually its name by the way, although you could be forgiven for thinking so.

Abbey’s latest consumer stupidity is its assessment of repayment vehicles for interest only loans. With Isas and unit trusts it uses the current value of the investment thereby ignoring any potential growth over the mortgage term.

This may indicate a total lack of faith in equity markets, something the Spanish could easily be excused for, or it might reflect a disconnect with reality where the concept of TCF has yet to filter through.

A further piece of absurdity is that such investments can only be utilised if arranged more than a year ago.

What foolishness is this? Would somebody at the Abbey like to explain to me why an investment arranged 13 months ago is suitable but one arranged 11 months ago is not?

The FSA asserts that it leaves commercial decisions to lenders – a view countered by the content of the MMR – however; the issue of treating customers fairly rears its head when absurdity stops borrowers from making sensible, informed borrowing decisions.

Alan Lakey is partner at Highclere Financial Services


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Yes, relevant qualifications are essential.

  2. CMC should have to be set up with staff achieving a minimul Level 4 qualification. They should also be regulated in that their business is reviewed to ensure that a spurious ‘blunderbuss’ approach is not used as it is today and only claims which they have investigated and are proven to be miss selling are made. Obviously using the former approach is miss selling on their behalf at the moment and they should be liable for costs and fees.

  3. Neil F Liversidge 28th September 2012 at 2:57 pm

    I took a call from a CMC a few days back. Their Indian call centre coached me as to what to say before patching me through to the UK side of the operation which, of course, has plausible deniability of the Indian side’s participation in a conspiracy to defraud. I have written to the PM and the MoJ. All CMCs should have their licences suspended IMMEDIATELY TODAY while the government investigates how the sector operates and puts in some proper regulation, chanrges for the use of FOS and criminal penalties for what is in reality fraud and perjury.

  4. It is a fact that CMC’s will use standard arguments in dealing with some claims, particularly PPI mis-sales, but this is simply because if you sell a product in a standard way and sell a product in a ‘one size fits all’ manner there are only a certain amount of arguments you can make. I am of course talking about bank mis-selling and not IFA sales. IFA’s will take into consideration a clients personal circumstances and other cover they have in place and if the product doesn’t fit will find something that does. A bank on the other hand, well if i don’t sell this i don’t get any commission!

    This is not to say that every letter from a CMC is exactly the same letter (and please don’t tell me that you don’t have standard recommendation paragraphs for stakeholder pensions, because you do), but each letter will be very similar because there are only so many ways of saying ‘this is a rubbish policy’ and actually saying the same thing just in a slightly different way still doesn’t make the sale or complaint any better. If you standardise the sales process, they are all being sold in the way and mis-sold for the same reasons.

    I do find it slightly amusing that both IFA’s and CMC’s have the same gripes about the FOS. Believe it or not CMC’s have exactly the same issues with the manner in which the FOS deal with claims as IFA’s do. If you want to see standard letters and standard responses read any number of FOS rejections about PPI. Tick box reviewing and can i reject this, yes, good, then reject, one more case off my desk. Of course i am coming from this from a completely different angle than you Alan, but that’s because we are on different sides of the desk, but the common issue still remains – are the FOS fitting their remit and the decisions consistent and fair? And I have to agree they are not and the FOS needs to do a lot to sort out their systems.

    Having dealt with endowment complaints in the past there was a point at which you would a) look at the rejection from the provider and say ‘yes that is correct and no this policy wasn’t mis-sold and b) only query any FOS decisions because you really felt they had missed an important issue but if they came back and explained the reasoning you would accept the argument and the decision, but now a) who would believe a word the banks would say and b) we do not agree with some of the stances currently being taken by the FOS, just because a customer is eligible for cover doesn’t mean they would have taken the policy regardless. On that basis selling someone who earns £15,000 a year a life policy with a sum assured of £1 million is perfectly acceptable as they are eligible for the policy!!! (and i know it totally depends on what their assets are etc etc, but eligibility does not make a good sale).

    and to Neil, i see a couple more IFA’s have been jailed today for mortgage fraud, does this mean all IFA’s/mortgage brokers should be closed as they are all clearly committing fraud?

  5. It would probably help if the MoJ were to be considerably more proactive in enforcing its own rules for CMC’s, starting with its clearly stated prohibition on cold calling. This, as we all know, is still absolutely rife.

    CMC’s commonly get round this rule by sub-contracting their cold calling to unregulated “marketing” companies. Why hasn’t the MoJ ruled that this is no different from CMC’s doing their own cold calling?

    In fact, no explanation has ever been provided as to why the MoJ instead of the FSA got given the job of regulating these low-life parasites in the first place, not least in view of the fact that the FSA is largely responsible for the creation of the very environment in which they can thrive and proliferate.

  6. You are a joke! Just like many IFA’s – patronising, condesending and think they are better than most.
    You will find that there are many more IFA’s/Mortgage brokers/financial advisors have committed fraud than CMC’s. So what does that tell you about exams? Diddly squat you stuck up tramps.
    As for the FSA – another UK joke. The only thing they regulate is the amount of money the baqnks can shaft us for. They commit fraud on a massive scale, but that’s OK- total hypocrites, just like IFA’s.
    Exams, FSA, TCF, what a joke you lot are.

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