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Written by rosalind renshaw

Claims companies should not be compelled to stump up cash to help fund the Financial Ombudsman Service.

Mike Ransom, managing director of Investor Compensation, laid into the Association of British Insurers for coming up with the idea.

The ABI has called on the FOS to look at ways for claim management firms to contribute to its funding.

The FOS is currently funded by compulsory industry subscriptions and by £500 case fees, payable after three ‘free’ cases, paid by the business that is the subject of complaint.

In the FOS’s annual consultation on its budget for 2011/12, the FOS said it plans to freeze both the case fee and industry levy for the second year running.

But it warned that it may need to increase reserves because it is concerned about lost case fee income pending the outcome of the judicial review brought by the British Bankers’ Association into payment protection insurance.

PPI mis-selling claims make up 25% of the record number of cases being referred to the ombudsman – and many are lodged by claim management companies, seeking compensation on a ‘no win, no fee’ basis.

In its consultation response, the ABI said it supported the FOS’s plan to freeze the basic levy and case fee. But it added: “The FOS should also explore other ways of reducing costs for firms, including options for claims management companies to contribute to funding.”

But Ransom said the call from the ABI was based on flawed foundations. He said: “PPI cases account for around a quarter of cases now being referred to the ombudsman service, and whilst the review is pending, the FOS fee structure will not effectively bring in the payment necessary to fund the organisation.

“Credible claims management companies should not be forced to pick up the bill in the meantime.

“Whilst some claims organisations may aggressively seek out potential cases, causing such an influx, a credible claims management company will validate all payment protection complaints they take on.

“Every case will be a credible one: all cases that are submitted to FOS have an eight page questionnaire detailing the nature of the complaint.

“Here at Investor Compensation, whilst we work on a ‘no win no fee’ basis, we do not take on lost causes, only legitimate cases, and that includes a policy being mis-sold because the customer didn’t realise they had taken out payment protection as it was simply added to the loan.

“It is the banks who should be paying the price for this phenomenon due to their widespread mis-selling.”

Comments

  • I agree with Marky B. Couldnt have said it better myself!!

    • 08 March 2011 16:41 PM
  • The complaint uphold ratio of FOS is very high. There cannot be too many spurious claims being made.

    • 08 March 2011 11:36 AM
  • If the FOs is free to consumers why do they need an ambulance chaser to make the complaint or is it that because they, the vulnerable consumer, did not read the documentation to begin with one must presume that they are incapable of making the complaint on the ground of illiteracy - or more likely could it be that a claim never occured to them before they were encouraged to make one on the premise of a free lunch. Generally, the letters that come from these vultures are all of the same ilk - they make various allegations without any supporting evidence and moreover without testing the veracity of the claim at the outset. For example, I had fun replying to a fishing letter received by a broker friend of mine. The letter was accompanied by a questionnaire (not quite eight pages) where the poor mis-sellee ticked just about every box that she had been sold a pup PPI policy. Oddly, when asked for further and better particulars, she could not come up with a shred of evidence, the reason being that she had not been 'sold' a policy at all. Yes, that's right, the policy was non-existent. My friend had a waiver on file, signed by the borrower, stating that his firm did not sell insurance at all and that accordingly none was provided with the loan. I did state in the reply that perhaps the ambulance chaser should now make a claim on the basis that no insurance was offered at all. We did not get a reply and hence we complained about the firm to the MOJ - which is what needs to be done.

    The reality is this - as said, that poor consumer would not have considered a claim had she not been approached by someone with a clipboard and encouraged to make one - she saw a few quid for nothing and was ably supported by a crack pot jackal (no insult jackals)who simply mass mailed, to divers firms, letters making spurious and vexatious claims without a scintilla of evidence or indeed any tests of what they had been told -for example, as I explained to the necrophiliac concerned in my reply - it might have been reasonable to ask the claimant for a copy of the policy - it's not rocket science is it?

    What should happen is that where a claim to the FOS is proven to be vexatious and without merit the consumer and/or the ambulance chaser should pay the fees and not the broker. That would be called justice - you may remember it. And lest we forget, that for us, this is a double or triple whammy. Not only do we have the FOS levies and costs and fees, but the imposition of time in dealing with this nebulous nonesense and, if banks or other providers have to pay 'compensation' those costs will be recovered by charging the sensible majority more for products and services. So the message is clear to claims management firms - you are not necessary and thus should preferably climb into the grave of the corpse you are following and thence be buried - capiche?

    • 08 March 2011 11:34 AM
  • There are too many 'pile em high' claims handlers out there, too many claims get to the FOS when they have no merit.

    However, the ABI should not expect all claims managers to pay for their arbitration service.

    • 08 March 2011 11:00 AM
  • whilst there might be genuine and honest claims companies i can assure you just because an 8 page questionnaire goes to the FOS does not mean it is a genuine complaint with valid arguments - any moves should try to weed out such spurious claims

    • 08 March 2011 10:47 AM
  • About time these claims companies had to put some money up after making thousands of spurious claims when misguided clients have paid them upfront fees (and will pay them ridiculous percentages of any award if they win too). I have a claims company letter this week for some insurance that I apparently mis-sold. For the umpteenth time I have to write back to confirm NO insurance was sold at all! Unprofessional mercanaries who need to be brought completely under regulation.

    • 08 March 2011 10:39 AM
  • Good idea. The sooner these fee hungry ambulance chasers are taken down the better.

    • 08 March 2011 09:10 AM