A recent article in The Daily Telegraph suggested that the financial claims “multi-billion cash cow” was refocusing from Payment Protection Insurance [PPI] claims to other areas. Although The Daily Telegraph is correct to say that there are many other areas where financial products have been mis-sold, it is not totally accurate to suggest that firms helping consumers with access to justice in respect of these products is a new development. Sure, there are some firms who were previously PPI focused and are now considering new product lines, but equally there are many firms who have specialised in other claims types and they have done this for many years.
CMR – “Bulk Claims”
In a recent consultation, the Claims Management Regulator [CMR] categorised claims into two types, ‘bulk claims’ (which included PPI and Packaged Bank Accounts) and ‘non-bulk claims’ which include all other financial products such as, endowment, pensions, mortgages and interest rate hedging products commonly known as SWAPS.
Specialist knowledge helps beat the claims maze!
Although specialist experts, who have a comprehensive understanding and knowledge of each specific claim area, are required to assess whether the product has or has not been mis-sold and to guide the customer through the claims maze, the hurdles to justice in respect of these claims are no different than the ‘bulk claims area’. Product providers in all areas of financial claims are equally adept at making a claim long winded and difficult to progress for lay people without the help of specialist knowledge. Consequently, it is not surprising that frustrated consumers turn to specialist firms to help with their claim. Commentators maybe suggest otherwise, but it is often not easy for a consumer to manage their own claim, even if they have the time to try.
Financial Claims Management Companies [CMCs] who help with such claims often employ ex- Independent Financial Advisers [IFAs] in respect of endowment and pension claims, ex-bankers in respect of SWAPs and ex-mortgage underwriters in respect of mortgage mis-selling cases. So it is maybe not surprising that these claims are often substantially more costly to process than ‘bulk claims’.
Mis-sold interest only mortgages
It is also not totally correct to suggest that it is the CMCs themselves who ‘farm’ these claims areas with a motive of self-preservation. It is not unusual for the regulator to ‘flip-flop’ its view of an area of business or the way providers dealt with their customers in that business area. Interest only mortgages are classic cases where the regulators view has swung from “interest only mortgages are a ticking time bomb”, to a relaxed “laissez-faire” approach, to the most recent news they will undertake another market review of the sale of interest only mortgages. It is, therefore, not surprising that CMCs will reconsider whether there is a further category of customers who need technical assistance with potential claims. The CMCs assessment, which is likely to run in parallel with the Financial Conduct Authority [FCA] market review will involve a substantial investment in experts taking a ‘deep dive’ into a potential customer circumstances and the providers sales processes to identify if there were any case specific or systemic flaws in the advice or advice process.
So in many ways it is not CMCs that create claims, if providers treated customers fairly and made sure that any products that were sold were suitable to customers’ needs and circumstances, there would be no mis-selling and there would be no claims to be made – simple, quod erat demonstrandum!