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Neil Liversidge: Undeserved PPI payouts are tantamount to fraud

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To date some £16bn has been paid out in compensation for missold payment protection insurance. Now the FCA has asked firms to review 2.5 million complaints to see if any more is due. Hard on the heels of this news Neil Woodford sold his funds’ HSBC holdings, citing the regulator’s capricious attitude to fines. 

Against this backdrop, claim chasers continue to fabricate claims. I have had dozens of offers to get me a refund on the PPI supposedly ‘sold’ to me with a HBOS loan I took out in 2005. The only problem is whilst I certainly took out the loan I did not ask for or get PPI with it. Over the years, I have had umpteen different credit cards and a few loans but nobody has ever sold me PPI. Sure, I have been offered it. It was invariably included in the repayment figures when I searched for a deal but I simply unchecked the box before applying. Likewise, when obtaining new cards or loans by phone the operative at the other end usually asked if I wanted PPI, but the attempt at selling it was of the pre-scripted tick-box variety designed to keep the person delivering it out of trouble when their internal sales management Gestapo listened in on their calls. 

On the one hand this does not mean the banks never missold PPI. Certainly they did in many cases, that much is obvious. I have had clients coming to me for help with genuine claims rather than pay away the typical 30 per cent or so that claim chasers demand. We have done the letters for free where they were established clients and for a pittance where they were not. All have been successful. Equally though I have been approached by more than a few would-be claimants where the sale was perfectly valid and they were blatantly trying it on. I have point blank refused to get involved with such claims. Afterwards though, more than one has called to say that their claim had been paid after the claims management company told them what to say on the form.  

Misselling is undeniably wrong but the fraud and deception being practiced day-in and day-out by claims management companies and their clients is a crime. I wonder how many of those who blithely put their names to forms full of untruths think of themselves as criminals. If they do, they probably rationalise it as a victimless crime. It is nothing of the sort. Where a small firm is the target the cost comes straight out of the owner’s income. Where banks are concerned it is the savers, pension fund members and shareholders who pay.

One day somebody in Government might wake up and realise that PPI is in reality a double-scandal. The first half of the story was the actual misselling. The second though has been the obtaining of payouts by those who did not deserve it. Obtaining a pecuniary advantage by deception, as the law used to call it. Does it matter? Neil Woodford obviously thinks so and as is usually the case, he is right.

Neil Liversidge is managing director of West Riding Personal Financial Solutions

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. A good article, Neil, though I disagree with you on one fundamental point, namely that the whole debacle is, IMO, not a double scandal but a triple scandal, the third part being the FSA’s failure to prevent it in the first place.

    I don’t think the reason was favouritism, as in selective light touch regulation. Rather, I think the FSA either turned a blind eye to what was going on or it mis-prioritised the allocation of its resources or it was a case of plain incompetence. And, worse still, no body, least of all the TSC, appears to making any effort to hold the FSA/FCA to account for this chronic regulatory failure, as a result of which it and the people within it will almost certainly, as usual, get off scot-free. That, to me, appears to be almost as great a scandal as the mis-selling itself and now the rampant mis-claiming, enthusiastically aided and abetted by scumbag CMC’s. What about holding them to account for encouraging people to submit fraudulent claims?

    Then again, even if the TSC were to raise the issue with the FCA (and actually get anywhere), we can be pretty certain that the response would be to instigate yet another multi-million pound “independent” investigation. And, as has been written elsewhere, a widely held view is that the best way to conceal the truth is to instigate an independent investigation. By the time the investigation has finally been completed and its findings published in (or obscured by) a 500 page dossier, the issue at hand has become stale old news. Even if a few names are actually named and a head or two must roll, they’ll be eased out with a massive golden parachute because that’s what their contracts of employment say they’re entitled to for “loss of office”. It all stinks.

  2. http://www.internationalviewpoint.org/spip.php?article3507

    I agree. I too unchecked the PPI box, but pre-occupied people might miss it. My thinking is: If a bank is dishonest in general, will it suddenly become honest if PPI actually becomes necessary for a customer who has it?

  3. @ Neil: ” I have had clients coming to me for help with genuine claims … We have done the letters … for a pittance where they were not [established clients ].”

    So, I’m looking at MoJ authorisation requirements (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/313625/Claims-management-companies-who-needs-to-be-authorised-notes.pdf) and wonder which exemption West Riding PFS falls under?

    The MoJ says:

    “Firms authorised by the Financial Conduct Authority (FCA) or one of their appointed representatives who in the course of carrying on a regulated activity (e.g. advising on investments) only notify clients that they may have a claim against a previous adviser [are exempt from authorisation]. Firms that fall within this category would not need to be authorised as this activity is likely to be an “ancillary activity”. However, where an FCA authorised firm (or appointed representative) provides a regulated claims management service for which they receive remuneration, then the FCA authorised firm (or appointed representative) would need to be authorised.”

  4. Watch out Neil, when I touched on this recently a certain wayward MM columnist jumped on my case and told me I was wrong.

    Of course, both you and I are right that the PPI debacle has become a feeding trough where every herbert is encouraged to dip his snout in the hope that a bank or provider will cough up compo rather than bother investigating.

    One of my friends recently suffered a complaint about the critical illness plan he sold and when he approached the insurer for up to date info they advised him that the plan had ended four years previously when they had paid the complainants cancer claim!

  5. Slightly tongue in cheek here, but the one thing this scandal has done is to make sure that at least some of the quantative easing money has actually made it down to the consumer, rather than the banks being able to sit on it and improve their bottom line (and bonuses…)

    Every cloud….

  6. Incompetent Regulators 19th September 2014 at 2:45 pm

    Neil you and APFA need to look closer to home. FOS complaints must be riddled with FRAUDULENT CLAIMS as there is no downside for consumers and no opportunity for LIARS to be sued. So why is APFA not doing anything about that big ISSUE?

  7. Tantamount to fraud? It IS fraud!

  8. I’ve just seen a new client about forthcoming retirement and his Personal Pension. Among other information, he volunteered that he had received £7000 compensation from Lloyds TSB in respect of a PPI arranged when he negotiated a persona loan at the time of a divorce, when he was ‘up s..t creek’ financially, and in desperate need of the loan.

    At the time he was in full time employment, working for a company which had recently been close to collapse, without any income protection and with no salary continuation arrangements in the event of long term illness in place with his employer, so the PPI would appear to have been appropriate to his needs and circumstances.

    However, he stated that he was told by the Lloyds employee that he ‘had to have’ the PPI, which of course was completely wrong, but which would seem to be the only element of the sale which could be described as ‘mis-selling’ Did that warrant a claim, and more importantly, £7,000 compensation? He stated that these facts were correctly reported to Lloyds and there was no CMC involved, so why did they pay out in full? Presumably because it was perceived that it was simply easier to do so.

  9. @Neil

    As I always say when the spectre of PPI is raised on these pages, please remember not to tar all CMC’s with the same brush. There are firms out there run by professionals with qualifications and experience who actually check the facts before accepting and submitting claims. Because the majority of subscribers to these pages have never sold PPI as advisors and would have sufficient experience to decide whether or not to buy it as consumers, you will never hear from them.

    If you or any other readers have evidence of fabricated claims, then please report them to the Claims Regulation Unit at the MOJ who do log every complaint raised and do regularly investigate CMC’s.

    As Julian raised earlier, the biggest scandal is that the regulator failed to take action on this despite having been aware of potential problems for many years. The second scandal is that the inconsistency of FOS means that some CMC’s will submit spurious claims to FOS because there is a good chance that a claim will be wrongly upheld. This causes huge delays for valid claims, many of which have now been with FOS for over two years

  10. Contractually anon 19th September 2014 at 10:46 pm

    @Gerry Cooper. If he was told he had to have it and he wouldn’t have taken it otherwise, then yes, that is most certainly worthy of redress. Whether your client should have been advised to take it is one thing, but lying to him about that fact he had to when he may well have thought he could not afford the additional 20-30% on top of the loan for limited protection is quite another.

    I’ve said it before and I’ll say it again, there have been multiple failings by multiple parties on PPI. FOS has made some shonky decisions, fraudulent claims have been made, some, (I’m tempted to say most),CMC practices are reprehensible and once PPI became regulated in 2005, the FSA was far too slow off the mark. However, by far and away the biggest ‘fraud’ in the whole debacle is by the banks. In the first instance by selling products of such high cost and low value (in some cases, the PPI was more expensive than any claim that could be made under it). Secondly, by spending years rejecting out of hand valid complaints. Thirdly, by spending even more years refusing to properly investigate complaints, letting them stack up at FOS and then taking them back in huge tranches and auto upholding, thus encouraging everyone to give it ago because there is a good chance of it being upheld.

    To their credit, the advisor community sold very little PPI, and rather more MPPI (a much better value product which is less complained about and even less upheld). Against their credit, the IFA community appears to spend more energy labelling consumers as liars rather than explaining to the wider audience how the scandal is another example demonstrating the value a good IFA can provide.

  11. @ Adam Smith: We do not act as a CMC. All we do is draft a letter for the client for them to send in over their own name. We checked with the MoJ and were told that this type of activity did not require authorisation as we are not ‘managing’ the claim.

  12. @Neil

    As I always say when the spectre of PPI is raised on these pages, please remember not to tar all CMC’s with the same brush. There are firms out there run by professionals with qualifications and experience who actually check the facts before accepting and submitting claims. Because the majority of subscribers to these pages have never sold PPI as advisors and would have sufficient experience to decide whether or not to buy it as consumers, you will never hear from them.

    If you or any other readers have evidence of fabricated claims, then please report them to the Claims Regulation Unit at the MOJ who do log every complaint raised and do regularly investigate CMC’s.

    As Julian raised earlier, the biggest scandal is that the regulator failed to take action on this despite having been aware of potential problems for many years. The second scandal is that the inconsistency of FOS means that some CMC’s will submit spurious claims to FOS because there is a good chance that a claim will be wrongly upheld. This causes huge delays for valid claims, many of which have now been with FOS for over two years

  13. I have yet to find an honourable CMC in the public space, one of those heavy advertising types? Anyone else come across one? If anything their advertising, web sites, etc are unethical (in that they purport to be consumer champions) and then take a colossal amount of the compensation due rightly to the complainant, who could have done everything, in most instances, through the FOS!

    We are regulated by the MOJ as well as the FCA, just to ensure that ‘managing a complaint/claim’ does not mean we fall foul of the rules – the advice to Neil contradicts some of what we had been led to believe, not that, fortunately, we have needed to do too many such cases.

    I should like to see the next miss-selling review covering CMCs and PPI to ensure the right paperwork is in place advising clients of their free rights to pursue a claim direct and with the FOS.

  14. As someone who has actually sold MPPI to a client (who’d actually expressed an interest in it without prompting), as an optional extra as part of an (Aviva) MPTA policy, I do know a bit about the subject. I was surprised at the range of options available and had to spend quite a lot of time firstly familiarising myself with them, then explaining them all (in writing) in terms that the client could understand, with costings for each. My advice was as thorough, professional and as compliant as I could possibly make it. I very much doubt if any bank advisers ever did the job to a comparable standard. Most, I suspect, didn’t even bother to check, let lone record the suitability of their recommendations. They just flogged it as an extra, often on false pretences, which is why nearly all such sales are now virtually indefensible.

    Nevertheless, that doesn’t excuse the FSA for having failed to take action on what was (to everyone else) an obviously mushrooming epidemic of mis-selling. As did the PIA with Equitable Life and the FSA with the banks’ reckless lending practices, it just looked in other directions until the car wrecks started piling up on the motorway and then pointed the finger at everyone else. As a result, the system is now so overloaded with complaints that it’s become a free-for-all of spurious claims, of which the CMC’s are taking maximum advantage. From one perspective, one can hardly blame them.

  15. I have had numerous clients tell me that they have written off to their bank/credit card provider/loan arranger to ask about mis-sold PPI.

    Some are curious, some are opportunistic and some are out and out fraudulent.

    Sadly the dubious methodology whereby it becomes cheaper to pay than to investigate simply galvanises others to have a go with the resulting spiral of claims.

    Whilst these matters rarely affect advisers the knock-on effect of bad publicity tends to stoke the fires of certain consumers and makes them think that we are all fair game for a bit of free compo.

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