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FOS view on vexatious claims

Anyone who reads the financial trade press will be acutely aware of the strength of feeling against Claims Management Companies [CMCs] within the financial community. The volume of negative comments from financial intermediaries appears to have reached another crescendo following a House of Commons debate on 19 March and an intermediary driven open letter to the Minister for Justice. A common thrust of financial criticism against CMCs appears to be a general feeling that CMCs fabricate fraudulent complaints.

However, the specialist staff within the Financial Ombudsman Service [FOS] are more than capable of identifying vexatious claims and it is a subject that the FOS senior management have reported on in the past and very recently.

FOS current thinking

The Chief Ombudsman stated in FOS ‘ombudsman news’ issue 105, “I’ve noticed more talk of “fraudulent claims” – with some reports that people are claiming for policies they never actually had. All this fuels the argument that society’s in the grip of “compensation culture” – and that this culture is growing in financial services.” The article continued, “I’m not seeing much that suggests consumers are more likely to make a speculative claim now than in the past.” Ombudsman news issue 108 went further rejecting the label ‘chancers’ that some commenters had given complainants. The article confirmed that FOS thought that it was not unreasonable that they should investigate complaints where consumers thought they might have had PPI, but were not sure. In fact FOS confirmed “our investigation regularly shows that the consumer has been paying for a policy that they didn’t explicitly ask for or know about – and that the business’s own investigation has failed to trace.”

Current volumes and costs

As a result of all the ‘noise’ in the media the real purpose of FOS is likely to be misunderstood and the fact that FOS only get involved in assisting with dispute resolution when the parties cannot agree is likely to escape many ‘lay consumers’ and even financial commentators. So when the FOS plan for 2013/14 talks about taking on 385,000 new cases [nearly 1,500 per working day] that relates to cases which can’t be settled between the parties. It is little wonder that the national media tends to focus on the FOS complaint uphold rates per financial businesses as this statistic identifies those businesses who could have settled with their customer, but chose to refer the matter to FOS. There is, of course, a cost to FOS and despite calls from some sectors for charges to be applied to claimants the FOS position is, “So as far as charging consumers for our service is concerned, we maintain – and parliament agrees – that their free right of recourse to the ombudsman helps underpin public confidence in financial services.” Small businesses who are concerned about the cost to them of cases being referred to FOS should be reassured that with the 2013/14 plan FOS has increased the number of “free” cases – where neither the standard case fee nor the PPI supplementary case fee are payable. The ‘free case’ limit will rise from 3 to 25 across the board.

The future

Although the financial trade press may ‘blame’ CMCs for the volume of claims, the Chief Financial Ombudsman and Chief Executive of the Service Natalie Ceeney positions the situation slightly differently. As she explained on a recent Watchdog programme FOS “are dealing with one of the biggest clean ups in financial services history.”

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The Benefits and Services of the Professional Financial Claims Association are intended to extend beyond its own membership. The Financial Claims Management sector needs a credible ‘voice’ at a time of change and increased scrutiny within the sector.