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‘Last-chance saloon’ for the cowboy claim firms

The Claims Standards Council has given hope to IFAs buckling under the weight of endowment complaints by promising to launch a “nuclear” attack on rogue claim management firms.<

Antipathy towards ambulance-chasers has reached fever pitch as endowment complaints have rocketed and IFAs have been forced to pay higher levies for the Financial Services Compensation Scheme.

Pressure has also increased on the Government to regulate claim management firms. The CSC is a voluntary watchdog which is expected to installed as regulator of the sector with the passing of the Compensation Bill. It says it has uncovered a series of scandals in the sector, including a case of a firm accused of dispatching bailiffs to recover their slice of compensation from late-paying customers.Policy director Andy Wigmore says the CSC has so far uncovered 10 rogue firms and has 57 complaints on file against claim management firms. He says sending round bailiffs to sort out customers is hardly common practice and that many complaints centre on marketing techniques used by firms.Wigmore says: “This is the last-chance saloon for firms that engage in scandalous market practices and are fleecing customers. We will go nuclear on these firms and they will be squeezed out of the market when we become regulator.”The CSC has also received a number of complaints about one of its members, endowment claim management firm Brunel Franklin, which has provoked IFA anger by offering its clients a “chequebook” to encourage friends and relatives to make complaints. Each book contains six cheques worth £100 for each referral which results in a successful claim.Brunel Franklin does not feature on the CSC’s list of rogue firms. One of its marketing leaflets says: “There’s no limit to the amount you can receive.”It tells customers receiving its chequebook: “There are six cheques within this booklet, which makes this chequebook worth a potential £600 – so keep this chequebook with you at all times as you’d be amazed at how many people suffer shortfalls.”The Advertising Standards Authority says it has received a complaint about Brunel Franklin for implying in its marketing that everyone holding an endowment policy is entitled to compensation.The CSC is investigating an entirely separate complaint against Brunel Franklin but is not at present following up any complaints about its marketing practices.Personal Finance Society public affairs director John Ellis is in no doubt that these marketing ploys are misleading and unethical. He argues that some claim management firms are implying that suffering an endowment shortfall entitles a customer to compensation automatically.The Analysts compliance officer Tom Kean cites what he perceives as the hypocrisy of claim-chasers using the same high-pressure sales tactics as advisers have been accused of using to sell policies in the first place.But claim management firms defend how their businesses are run. Endowment UK director Marianne Fitzjohn says firms like hers have a clear responsibility to manage policyholders’ expectations and ensure they do not see their endowment shortfall as a winning lottery ticket.Brunel Franklin, which says it carefully vets all its marketing material, highlights its credentials as an active member of the CSC, a long-term campaigner for regulation and a pillar of the claim management community.Claims director Ian Allison says the refer- a-friend idea encompassed by Brunel Franklin’s “chequebook” is a legitimate marketing tool that has been used successfully by the financial sector for many years.Allison says the firm is educating the public about their right to claim for missold endowments, which will be lost by the arbitrary time-barring by life companies.Independent compliance consultant Adam Samuel says these firms would not exist if the industry handled complaints properly.He says: “Everyone talks about these evil firms after their pound of flesh and driving up fraudulent complaints but firms operating on a no-win,no-fee basis will not go after obviously invalid complaints they have no chance of winning.”With the FSA last week fining Guardian Assurance and Guardian Linked Life £750,000 for “serious systemic flaws in mortgage endowment complaint-handling procedures”, there is evidence that customers need claim management firms.Whether firms will be allowed to be so aggressive in pursuing their slice of the compensation pie remains to be seen.

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