In the FOS annual review, released today, Merricks says the fact claims management companies are succeeding in identifying large numbers of consumers who have suffered a loss, as was the case with PPI, shows the system is failing.
More than half of all PPI claims in the past year were lodged by claims firms on behalf of consumers.
Merricks says: “What is clear is that the present system for dealing with large areas of unremedied consumer detriment is in need of reform.”
Proposals currently being considered by the Government in the UK and the EU would allow a single claim to be made on behalf of a group of people, without individuals having to register their complaints separately.
Merricks says: “This is seen as a more effective method of determining collective issues – and of generating redress, where appropriate. While this may not be a universal or even an appropriate remedy for all instances of widespread detriment, it does focus on the core of the bigger problem, rather than on the detail of individual cases.”
He says any reform would have to resolve issues generically for all affected consumers not just those who made a complaints. It would also have to avoid offering easy opportunities to claims-management companies to take disproportionately large slices of redress from consumers.
Merricks says: “A solution to the problem would reduce the volatility of the ombudsman service’s workload, adjust unrealistic expectations of what we can be expected to deliver, and ease tensions between the financial services industry, its regulator and its ombudsman.”
As reported in this week’s Money Marketing, a quarter of all complaints in 2008/09 were referred to the FOS by claims chasers on behalf of consumers. This is a 40 per cent increase on the previous year.
In particular, FOS’s annual review highlights the large number of frivolous claims surrounding SERPs last year originated by a small number of claims chasers that had no realistic chance of success.
So what needs to be done to make the system work more effectively? IFA’s have been very vocal about case fees and having to pay for cases that are not upheld. But what other aspects of the system are flawed?
How should complaints involving large numbers of consumers, such as the recent Barclays mis-selling, be handled?
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