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Merricks looks for FOS reform

Financial Ombudsman Service chief ombudsman Walter Merricks has admitted that the “wider system” of complaints handling is not working.

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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Comments

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

  1. Reform as in improve?
    •Reform means beneficial change, or sometimes, more specifically, reversion to a pure original state. Well Wikipedia put it better than I could by using non inflammatory language. The first step would be to give Mr Merricks his P45, then close down the FOS because it is acting illegally, at least one former senior legal person readily admits this. The ‘original state’ we would like to see returned is where the law of the land applies, period.

  2. FOS REFORM
    Walter Merricks is obviously detached from reality! He believes that because claims-chasers are generating large numbers of claims it shows tthe system is failing. In reality, the majority of endowment complaints were really complaints about performance. If they had been taken in that form to the Ombudsman they would not have succeeded. The claims-chasers ‘re-shaped’ the complaint to one of suitability in order to gain access to the Ombudsman. The Ombudsman saw this when receiving many identical claims with questionnaires completed with identical wording. They chose, however, to ignore this. People who are not telling the whole truth would rather hide behind a claims-chaser than produce dubious information themselves. When will statements made by advisers be given equal weight to those made by complainants seeking compensation?

  3. The Mystery Shopper for IFAs 27th May 2009 at 4:46 pm

    FOS Reform
    I’m with Evan Owen on this. Sack Merricks as he now knows he is onto a loser, For so many years he and his staff have abused IFAs and the financial services industry by acting illegally, employing underqualifies staff and ignoring any challenges to these genuine points. As well as sacking him I would take it a step further. A full Serious Fraud Office investigation to dodgy claims for compensation by a dodgy ‘Omudsman’ who is in name only. I have it by first hand information that some claims were waived through to the detriment of insurers. Acting in bad faith under FSMA 2000 gives the FOS staff no protection. We need to see them brought into line just like MPs have to now eat humble pie. The FOS is the biggest Ambulance Chaser in the UK.

  4. FOS Reform
    Entirely and absolutly agree with all 3 comments. Evan – Have you made any progress regarding the compatibility of the FSMA 2000 and the Human Rights Act – Now that our MP’s have been caught short on standards, it may be a good time to press the point? They seem to be catitulating somewhat on Freedom of Information issues?

  5. Review of FOS
    I agree that a review is needed. This is because it is difficult for consumers to understand who does what, and because credit providers show no concern for the penalties. Apply for a copy of your CCA agreement (section 77 & 78) and the lender should provide it within 40 days. If they do not, they are reported to an office that can only request it again, but cannot penalize. The FOS can arbitrate, but cannot penalize, just put the consumer in the position they should have been. The FSA is only concerned with complying with regulations. The FSA CAN impose penalties, but they do not hurt the lender . By the time they receive a £2M fine they have made many more millions in profits, and taken their bonuses and commissions. Abbey for instance, were fined £2M in 2002 for Money Laundering matters. The report criticises them for ignoring previous warnings and directives. Ask them for copy bank statements and other supporting documents and you only receive a partial response. Ask them to investigate a fraudulent transaction and they do not if they think they can avoid paying out. Make a complaint and they fail to observe their own Complaints proceedure. A consumer should be able to approach one body to deal with all of the issues. In addition the providers should be fined and “Named and Shamed”. The senior management should be vicariously liable for the actions of their subbordinates. The FOS and FSA are trying to do a very valuable job, but without the mandate to really punish those who blatently abuse the rules.

  6. Looking forward to a fraudulent complaint
    Sounds weird, but makes sense as an IFA recorded an FSA visit and the facts differed from the recordings, so we started recording (by client agreement) ALL client meetings and phones. Ironically, the FOS reccomend this for Gi (i.e. car and house insurance as stated in the CII’s knowledge book because it reduces fraudulent claims!). Easily done so why is it not reccomended for advice? I look forward to invoicing as allowed under FOS rules an attempted fraudulent claim where I have a recording of lies……………………..

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