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Home > Regulation > UK Regulation

By Michael Trudeau | Published Aug 16, 2012

Fos fights back over vexatious complaint claims

Widespread claims that firms are facing increasing Financial Ombudsman Service bills due to large numbers of frivolous or vexatious complaints is not borne out by statistical evidence, according to a spokesperson for the service.

Many firms across the sector have complained of a rising number of claims, many of which come through claims management companies, that are frivolous. Some have said that in many cases the claims relate to individuals that have never been customers of the defendant firm.

This is particularly true of banks facing large numbers of payment protection insurance claims, but has been reported among even some advice firms. Last month FTAdviser reported on two firms that have been hit with five- and six-figure sums relating to allegedly spurious complaints.

Commentators across the industry have used the rising tide of anecdotal evidence to demand greater controls are placed on CMCs or that Fos imposes a case fee on such claims.

However, according to a spokesperson for Fos, only 5,667 of the 222,333 complaints settled in 2011-2012 could be categorised as vexatious or frivolous, representing only about 2.5 per cent of the total.

Moreover, the Fos spokesperson told FTAdviser that in one quarter of cases where a bank has said no PPI was ever sold, the Fos has found this assertion to be false.

The Fos drew criticism recently when it stopped short of imposing a case fee on claims management companies. The ombudsman did, however, seek to relieve pressure on smaller companies by increasing the number of fee-free cases from three to 25.

Notably, however, this threshold will apply to networks as a whole rather than at an individual firm level, meaning appointed representative adviser firms are not likely to benefit significantly.

Explaining why it rejected calls for a case fee for CMCs, Fos said: “We do not believe such a requirement would address the underlying issues in the claims management sector, not least because the costs would ultimately be borne by consumers themselves.”

Rather, it emphasised the need for better regulation of the claims management sector and called for “better prevention of ‘mass complaints’ at source”.

Fos revealed today (16 August) that the number of complaints for mis-sold payment protection insurance has doubled the projected rate, with the Fos now taking on up to 1,500 new cases every day. Front-line enquiries have doubled to 2,500 daily compared to the start of the financial year in April.

Even after expanding its staff last year in order to deal with the rising tide of PPI complaints, Fos chief executive and chief ombudsman Natalie Ceeney claims the sheer number of complaints is making it making it difficult to deliver a more prompt service.

The Fos has received about 400,000 PPI complaints in total.

Additional reporting by Ashley Wassall

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