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Chasers hit Pru hurdle

Endowment complaint firms have had a bit of a bruising recently, which is ironic since they are the ones who are chasing the ambulances.

Now it seems the product providers have had enough too. Prudential is refusing to pay commission to endowment chasers and will only pay direct to the customer. The chasers will now have to get their commission, often up to 25 per cent, from the client.

Norwich Union also believes the full amount should go direct to the customer but, like Pru, it will deal with solicitors who are regulated by the FSA and are acting on behalf of clients.

Prudential estimates that nearly a quarter of the payments that it made over the last year went through complaint handlers, amounting to around 438,000 of the 1.7m it paid in this time.

It says there are no time or financial advantages for customers to use third-party firms and it will not treat customers who go through them any differently from those coming direct.

While the Financial Om-budsman Service is unable to comment on specific provid-ers, it is keen to highlight that consumers can make a complaint for free and welcomes any progress in this area.

Pru has decided to make this move now because it has seen a surge in the use of chasers in the last six months with an increase in advertising from these firms.

Research by the Pru shows that around 2.4 million people rely on an endowment to pay their mort- gage out of the nearly 5.2 million who claim to have a policy linked to their current homeloan.

Pru chief executive Mark Wood says: “It is not fair that, on average, 25 per cent of the money should go to a third party when by complaining directly to us they can achieve the same outcome, in the same amount of time at no charge.

“We are concerned that some customers may not know they have the option of dealing with us directly and this will cost them nothing. If a customer has been missold an endowment, then they are entitled to compensation and we firmly believe they should receive 100 per cent of the compensation.”

Norwich Union has gone one step further by saying there should be regulation and strict procedures for third-party com- plaint-handling firms to protect consumers. This should include timescales for handling customer applications, clear and transparent charging and the procedures for handling disputes. NU has set aside 1bn for mortgage endowment customers fac- ing shortfalls.

The Financial Ombudsman Service also offers a free service but in recent months it has been inundated by complaints. Around 12 per cent of the FOS’s cases come from a third party.

However, there are reckoned to be some benefits in using endowment chasers. They are supposedly experts at what they do and should know the procedures, have in-depth knowledge of the rules and what and how to complain.

Complaint handler En- dowment Justice says almost half of the compensation offered to customers is calculated incorrectly and warns that if a cheque is made out to the client and banked then the case is closed.

The Pru move has generally been welcomed by IFAs. Barry Johnson Financial Services senior partner Barry Johnson says: “We have already recommended that firms stand up and do exactly what the Pru is doing. It is time they said enough is enough.”

Personal Touch Financial Services managing director Mike Allison says: “It is about time this happened. The problem has been in establishing who was to blame for the scandal – was it the IFAs or was it the providers? In most cases, although not all, the pressure came from the providers. There is no reason why third parties should be benefiting from this. The money should go directly to the customers.”

Which? principal resear-cher Teresa Fritz says: “You are not getting any more service from these third-party firms. You may as well bite the bullet and make the complaint direct.”

Norwich Union has been lobbying the FSA since last November to regulate endowment-chasing firms. NU operations director Mike Kirsch says: “The FSA has been listening but I do not think that there has been a huge amount of progress.”

NU says these firms need to come under the eye of the FSA as they are not authorised to handle client money and they do not display how they add value to the customer.

Kirsch says: “We are de-lighted the Pru has followed our lead. I guess that other providers will look at joining us as a result. Customers simply do not gain anything by using these companies.”

FSA spokesman Robin Gordon-Walker says: “The Pru has made a company decision. The FSA has said there is no reason why people should need to use third-party claim firms.”


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