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Emma Simon: Could legal reforms curb our complaints culture?

It may sound odd from a consumer journalist but perhaps the only way to make the complaints process fairer is to make succesful complaintants pay more.

Emma Simon MM blog

Will advisers be keeping an eye on legal reforms designed to curb the “compensation culture”?

The Legal Aid, Sentencing and Punishment of Offenders Act (which came into force on 1 April) changes the way “no win no fee” litigation cases are funded.

On the face of it, it may look the same. There are no upfront fees, and claimants are not left with hefty legal costs if they lose a case. But those who have tripped over paving stones, or whipped their necks in traffic accidents will now pay a ‘success fee’ to lawyers if they are awarded damages – limited to a maximum 25 per cent charge.

The thinking is that if there is some financial cost to claimants it will reduce the number of exaggerated and spurious claims – and put a brake on spiralling legal costs.

Previously there was no incentive for claimants to shop around, as win or lose it is the opposing side that picks up the tab. This has given some carte blanche to push up legal fees in recent years – with some ‘success fees’ bearing no resemblance to the size of the claim.

If these reforms work could similar practices be adapted to other areas of consumer complaint?

The problem until now has been how to deter vexatious or fraudulent complaints about all manner of mis-sold products, without deterring or pricing out those with legitimate grievances.

While the former may be in the minority, there is no doubt they cause significant problems, particularly for smaller firms. It may be those who have simply read about the thousands being paid out on PPI claims, and think as they have had a credit card for 20 years, it is probably worth a punt.

Or it could be those who have had a less than amicable relationship with their bank, their insurer, or their adviser, and decide they are going to create waves. The growing industry of claims management firms, cold-calling, texting, and generally making a nuisance of itself 24-7 does not help either.

So could a similar solution work here? I would argue that it would be better than some upfront charge to weed out the chancers. Even if this is set at a very low rate, it could penalise those who are most financially vulnerable.

Charging a fee to those who pursue invalid complaints is also problematic. Who would decide what are unreasonable complaints, and more complex problems that ultimately are not upheld.

A fee at this point would discriminate against and discourage those in lower income groups who have brought a claim in good faith but can not afford the ‘fine’.

It may seem completely counter-intuitive but perhaps those that are successful should pay a small fee.

This money could be used to improve services like the Financial Ombudsman, or, better still, Citizens’ Advice, which provides real financial help for those that need it most.

At the same time, third parties that fail to carry out due diligence and repeatedly bring claims without any realistic chance of success should be fined out of existence.

As a consumer journalist I realise some of this does not sound particularly consumer-friendly. But if it drove out the worse excesses of the complaint and claims system – which clog up services like the FOS – the this could be a real benefit for customers and providers alike.

Emma Simon is deputy personal finance editor at the Telegraph Media Group

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Sounds a sensible solution to me, the only problem is that simple common sense solutions no longer seem to be heard in the financial services industry due to the many vested parties!

  2. When a PC sues for tripping while on duty, you know it has finally gone too far.

    The claims culture is used as an excuse for not using common sense.

  3. FOS will not hear of it.
    They are, by their own admission, consumer champions with a one way bias which is not towards the adviser.

  4. @ Anonymous | 5 Apr 2013 2:15 pm I heard ther Chief Constable and the Police Federation BOTH being interviwed on the subject and some common sense needs to be applied here as the Insurer who this woman is claiming against could make a counter claim against the Police Service and Chief Constable with all the mess that entails.
    If she is being paid sickpay for the accident having happened at work and then claiming personal injury too, then arguably she is being paid twice for the same accident which no insurer will agree to.

  5. As we as a firm provide information and services which are NOT regulated by the FSA as well as those which are, our Client Agreement clearly states the Common Law Tmebars of 6 years, 3 years and the 15 year longstop.
    We explain to them (on MP3 file record, not just in writing) that for our ongoing advice service, the 15 year clock does not start ticking until they cease to be a client who pays for our services and storage of files and records. The moment they cease to be a client and move to a transactional service then the 15 year clock logically starts ticking from that date for ALL services whether regulated or NOT and the fact the FOS chose to ignore it pre RDR does not recognise the fact that post RDR, no adviser fee makes the longstop timescale VERY clear. I told this to the FSA about 4 years ago and was threatend publicly by senior FSA staff for suggesting that it was appropriate to make clear to a client that there were fixed timescales to raise a complaint in common law.
    I still have the letters on file from said senior FSA staff and I also have copies of the agreements that we then put in place when we called their bluff and NOTHING happened.
    The FSA were bullies, the question is will the FCA management style be any different when most of the staff are the same as is the company number 01920623 Bullys need to be VERY careful as senior people at HBOS are now finding as the same stick as is used to beat staff can sometimes be used to beat senior management. The FCA have started beating the banks and now it appears with Sir Sandy Crosby The FSA’s former staff. Perhaps the FCA will not just be an unrecorded change of name at Companies House as appears to be the case so far, but I will not hold my breath…..

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