Article by Phil
We’ve looked at the performance of Claims Companies (CMC’s) many times before and as you’re probably aware we don’t hold them in particularly high regard!
So, it’s no surprise that the latest research continues to highlight this. A Freedom of Information request by Money Marketing has revealed that over the last 3 years only 23% of claims brough to the Financial Ombudsman Service (FOS) by either CMC’s or solicitors have been successful.
That means that more than three quarters of claims brought to FOS have failed. Just think about the waste of resources spent on looking at all those claims. Over 377,000 cases. That’s on top of almost 500,000 cases brought by individuals without the “help” of solicitors or CMC’s.
These are claims for financial negligence and wrongdoing against a whole range of financial services providers. Including banks, but also including financial advisors. Unfortunately, even when these claims are turned down under investigation there is a still a cost. Financial Advisers must report all complaints they receive whether they are valid or not. The number of claims then affects the cost of Professional Indemnity Insurance (PII). As the cost of PII rises so does the cost of advice. So, these three out of four “spurious” claims still end up costing the average customer more in terms of the cost of advice.
Perhaps it’s time to look at a different approach?
In Employment Claims solicitors now must pay an initial fee upfront to bring a claim to tribunal. The net effect has been that the number of claims being brought has dropped because solicitors are now evaluating them more closely. Perhaps we could do the same with FOS claims? Especially for those brought by solicitors and CMC’s? It would probably help. People could still bring their own claims without any help. In fact, they would probably be better off. The research shows that of those claims brought without assistance, that 36% were successful. One in three as opposed to one in four with a CMC.
Don’t forget CMC’s also take a cut of any damages awarded.
CMC’s have also come under the spotlight in a recent report by the Work and Pensions Select Committee looking at pension scams. The Committee were particularly concerned by the rise in the number of advice firms who had subsequently “phoenix” to become CMC’s. These firms have then contacted customers to offer a mis selling service on behalf of the investments and pensions they had previously recommended! Sine the FCA took over the regulation of CMC’s it seems that over 140 CMC’s have given up their regulated permissions. But the Work and Pensions Select Committee feel that the public need to be made more aware of the risk of what they describe as “secondary scams”.
