About an hour ago, shortly before I began writing this column, my home phone rang. I have been expecting an important call, so I raced through the house, almost tripping over the dog in the process, and managed to grab the receiver in time.
“Did you know that you may be entitled to compensation if you have been missold PPI?,” a disembodied voice recording informed me, just before I slammed the phone down in frustration and rage.
Like increasing numbers of consumers, I am plagued by PPI compensation cold calls. Even more annoyingly, not only are these calls pointless – I would never have taken out PPI in a million years – but the scope for con-merchants has grown exponentially.
Years ago, scandalously obstructive complaint systems operated by many insurers, as proven by large FSA fines against some of the worst offenders, coupled with a far from user-friendly Financial Ombudsman Service, meant claim companies could claim to play a small but useful role.
Their potential expertise meant consumers who truly did not understand what the actual issues were with the products they had been sold, could get some help and advice – albeit at a high cost.
Today, however, the picture is different. As my fellow-columnist Alan Lakey aptly describes them, this new breed of cold-callers is a “pestilential nuisance”.
Alan argues these calls are more than that. If they manage to snare the “right” complainant, there is the potential for an IFA to face a large compensation claim.
The key issue, it seems to me, is of how likely that scenario actually is. Alan’s conclusion, a carefully constructed house of cards over several recent columns, is that the problem is a serious one and that ultimate fault likes with the “too easy” FOS complains system and absence of a long stop for financial adviser product sales.
A few weeks ago, Alan described in Money Marketing how he met with the Ministry of Justice on this issue. He told of one fishing letter sent to an adviser, which asked for information about “any company which might have arranged a PPI plan”. Irritating as this letter probably was, one is left wondering why a one-sentence reply saying “I did not transact a PPI sale for this client” would not have sufficed.
In another case, a claim company “sent a truly offensive letter which has shaken the adviser so much that he is planning to exit the industry”. That must well have been an inconceivably vile missive, far more insulting than the comments regularly posted at the bottom of my columns in Money Marketing, which have over several years not deflected me one small jot from writing what I do.
Ironically, it was this paper’s own editor Paul McMillan who, writing in the February/March issue of Ombudsman News, pointed out the truth in terms of how claim chasers really affect IFAs.
Paul wrote: “Of the 3,000 or so complaints referred to the Ombudsman Service about IFAs last year, around a quarter were brought by third parties on behalf of consumers. Of these, 30 per cent were brought by claims managers compared with 20 per cent brought by other IFAs.
“As the complaints generated by claim management companies were skewed during the year by a small number of companies focusing on Keydata and Arch Cru-related issues, we could soon have a situation where more complaints about IFAs are generated by other IFAs than by claim managers.”
The latest FOS figures show that the number of complaints against IFAs has now fallen to about 2,600, of which about 1,200 are unsuccessful.
I accept that an IFA is not automatically at fault simply because the FOS has found against him or her. But on balance that tends to be the more likely scenario. So let’s focus on the cases where the IFA won. Based on Paul’s statistics, this could be taken as indicating that up to 90 unsuccessful claims against IFAs were brought to the FOS by a claim management company.
Except I do not believe the true figure is anything like that high. My hunch is that claim companies are like any other organisation and pick easy-win cases where they can. Even for them, there is a cost, admittedly lower than an IFA’s, to making an unsuccessful claim. Moreover, the overall numbers of their complaints are too few to indicate a genuine scattergun and random approach.
So where does that leave Alan’s allegations in Money Marketing? The chances are that barely more than a dozen or two cases, if that, are genuine causes for alarm for IFAs as far as claim chasers are concerned.
By “cause for alarm”, I do not mean they give rise to compensation awards. They might have the potential to generate the much-loathed £500 FOS adjudication fee. Except they won’t, because as Alan admits: “This will be increased to 25 [free cases] shortly.”
Alan’s tear-jerking final focus on poor retired IFAs facing expensive bills about sales that took place more than 10 years ago following injustified complaints by claim chasers would be more effective if he could tell us how many such cases there have been in, say, the past three years.
My guess is none. But I am sure he will put me right. Anyway, must dash, my phone is ringing…
Nic Cicutti can be contacted at firstname.lastname@example.org