Lloyds Banking Group, a powerful but extremely self-interested voice, has joined the growing clamour against firms which incite spurious claims.
In a letter to justice secretary Chris Grayling, Lloyds chief executive Antonio Horta-Osorio calls on the Government to force firms to cover the cost of “invalid or bogus” Financial Ombudsman Service claims.
In response, the Ministry of Justice says it is looking to “minimise the burden” caused by unscrupulous claims firms and is in talks with the British Bankers’ Association.
It is worth remembering the growth in PPI claim firms is largely due to extremely poor claims handling from high street banks who invested significant sums trying to persuade those with valid claims to drop their complaints.
If the big banks had come clean and admitted their responsibilities earlier in the day there would be less claims firms competing for business. If they hadn’t dragged their feet with so many valid complaints the banks would not be suffering the recently introduced punitive £850 FOS case fees for PPI claims.
That said, it is good to see Horta-Osorio joining the huge number of IFAs and mortgage brokers calling for action against dodgy claims firms.
It is a depressing reality that the influence LBG carries in the corridors of power is far greater than a group of angry advisers.
The MoJ says it is beefing up its claims firm regulation with 200 firms recently shut down and a further 400 warned or suspended. However, far more needs to be done.
The Legal Ombudsman will soon be given powers to award up to £50,000 redress to consumers who believe they have been mistreated by claims firms.
But firms burdened with the costs of dealing with dodgy claims have no-one to complain to. These can be substantial costs for a small firm to stomach which may end up being passed down to clients.
As a result a number of advisers have taken matters into their own hands, billing claims firms for the time it has taken to deal with such complaints. As we have reported, a number have actually paid up.
Rather than waiting for the MoJ to get its act together, perhaps Horta-Osorio might consider following suit and charging firms for the time taken to deal with their dodgy claims. Direct action from advisers and the banks could be best way to clean up the claims farmers.