Ombudsman News is, as my more discerning readers will know, an essential publication. Essential mainly for insomniacs and financial services nerds, but still.
But as dedicated as the Financial Ombudsman Service is to its mission of saying nothing of interest, ever, occasionally even their high standards drop and a noteworthy item slips through the net.
Usually this appears in the themed case studies of complaints that the Service has handled. And so it is, in the June/July edition of ON, that we have the rather odd case of the insurance policy that wasn’t.
The complaints featured in this edition are collected under the heading of “consumer complaints brought by third parties”. In other words, complaints referred to the ombudsman by family members, friends, solicitors and claims management companies.
The second case study in this selelction is headed “claims-management company complains about mis-sale of PPI on behalf of a consumer”
“Mr G was relaxing at home when he got a phone call from a claims-management company. He had not had any dealings with the company before – and he later said he had been annoyed at first to have his evening interrupted. However, he soon became interested in what the company told him.
He was asked if he had ever had a personal loan. When he said that he had taken out a loan ‘sometime around 2003’ but had now repaid it, he was told it was ‘highly likely’ that he was entitled to compensation.
The claims-management company urged him to ‘act quickly’ and said it needed him to answer a few questions over the phone, so that it could complete a PPI (payment protection insurance) questionnaire for him. Mr G was not at all sure that he had taken out a PPI policy – and his answer to most of the questions he was asked was ‘I don’t remember’. However, the claims-management company assured him that it was ‘confident of a positive result’.
Acting on Mr G’s behalf, the company then sent a complaint to Mr G’s loan provider, saying it had mis-sold a single-premium PPI policy when it gave him the loan. The loan provider responded by stating that it had no record of ever having sold PPI to Mr G. It enclosed with its letter a copy of Mr G’s loan agreement.
The claims-management company then referred the complaint to us. It told us the loan provider had persuaded Mr G to take PPI by telling him it was essential if he wanted to obtain a loan. The company also told us that the loan provider had failed to explain the cost of the policy to Mr G, or to draw his attention to the limitations on the policy benefits.”
You may be less than shocked to hear that this complaint was not upheld:
“We asked the loan provider for information about its dealings with Mr G. It said it had only ever supplied him with one loan, which he had since repaid, and it had never sold him a PPI policy. It sent us a copy of Mr G’s loan application and details of his payment history. Mr G had indicated clearly on his application form that he did not want PPI. And there was nothing to suggest that he had ever paid more than the monthly repayment amount shown on the application form.
We asked the claims-management company to send us any evidence it had to show that Mr G had taken a PPI policy. It was unable to do this.
It is understandable that consumers can sometimes be uncertain whether or not they were ever sold PPI in the past. In this instance, however, we noted that the loan provider had given the claims-management company clear evidence that it had never sold PPI to Mr G. We did not uphold the complaint.
In accordance with our rules, we decided the case was ‘frivolous and vexatious’ – which is how we categorise fewer than 1% of the cases we decide.”
Well, quite. But what kind of claims management company would refer a complaint to the Financial Ombudsman Service about a policy that never existed?
Startlingly, and going by my postbag over the last few years, the answer to that question appears to be, “almost all of them”.
The financial claims management industry is, shall we say, an odd little corner of the legal world. There are, without doubt, claims to made and wrongs to be righted in respect of PPI sales and bank charges. But I wonder if they need to be pursued in such a bizarre manner?
For starters, I get plenty of complaints about policies sold in the 1980s, or (as with the case study) not sold at all. Obviously, in these cases all I need to do is to point to the Limitation Act or to the absence of any sale to complain about. Right?
I wish it were that easy. Typically, the follow up is another letter setting out the complaint in identical terms, or alleging that we haven’t responded at all. It is, to say the least, rather baffling.
Or take the standard claims management procedure for starting a complaint, which is to make a request under either or both of section 77 of the Consumer Credit Act 1974 (sometimes section 78) or section 7 of the Data Protection Act 1998. These requests are utterly pointless, yet arrive at the offices of lenders across the country in their hundreds every week.
Pointless, because they are intended to discover alleged ‘facts’ that are irrelevant to any claim that might be made.
In the case of the CCA request, the hope is that the lender will be unable to provide a properly constituted copy of the credit agreement, and that the debt will consequently be unenforceable. That argument has been fatally wounded by Carey v HSBC and other judgments, but these fearless champions of consumers aren’t going to let mere law stand in the way of justice.
The DPA requests (or “subject access requests”) have more substance, in that they at least might disclose records of charges made and of the sale of the PPI policy (if one exists). Simply asking for that specific information would be too easy, of course, when you could also discover evidence of a commission paid to the lender in breach of a fiduciary duty that, um, doesn’t exist.
Now, the thing about subject access requests is that they oblige a data controller (in the language of the Data Protection Act) to provide a copy of all of the personal data that it holds about the requestor. There is no obligation to provide information that the data controller doesn’t hold, or that isn’t personal data, and there is no obligation to provide copies of original documents.
Naturally, then, responding to a subject access request from a claims management company leads a lender down a rabbit hole of increasingly bizarre correspondence. You deliberately withheld information! (Um, no, it just doesn’t exist). You didn’t send the mortgage statement! (You know it’s a credit card, right?) You’re in breach of the CPR! (Er, what?).
It’s almost as if the claims handlers are just sending the same series of standard letters to everyone, without regard to the responses they get or the specific needs of their clients. But that can’t be right, can it – surely they’re standing up for the little man against the faceless corporations, rather than churning form letters to make a quick buck?
Why does any of this matter? Well, it matters very much to me, because of the evenings and weekends I have to give up to dealing with this rubbish. Boo hoo.
But it should also matter to the clients of the claims management companies, and to the public at large. It delays the making of actual claims, often by a year or more, so that people who have been genuinely wronged wait longer than they need to for compensation. It increases the cost of getting that compensation (because the claims handlers have to employ people to churn the pointless correspondence) and the cost of credit generally (because the lenders have to employ people to deal with it as well).
Then there are the law firms who get involved in this work. I should stress that I have no reason to doubt that most act entirely properly in doing so, but I have seen firms (such as the notorious Consumer Credit Litigation Solicitors) use identical form letters to those used by the claims handlers that refer to them, and end up down the same rabbit hole.
One might at this point consider Rule 1.05 of the Code of Conduct, which requires that solicitors must “provide a good standard of client care and of work, including the exercise of competence, skill and diligence”. But I am sure that such firms are able to, and do, make their own judgements about how best to comply with their professional obligations.
Let me end by stressing that I believe that consumers who have been wronged very much deserve appropriate compensation, and that payment protection insurance business in particular has been carried on in an less than fair manner during the last decade. We must recognise that not everyone is able to act on their own behalf in securing redress, and that claims management companies in that sense may be a necessary thing and even a social good.
But the manner in which this business is conducted is all rather odd. Really, would it be too much to ask that the claims be made with just a little understanding of the law and without so much, y’know, faffing about?