Nic Dakin, Labour MP for Scunthorpe, has kick-started a debate on reform of the Financial Ombudsman Service by using a parliamentary question to warn of the “damage” its approach can do to small businesses and lament the lack of an appeals process for businesses that lose claims.
Mr Dakin also raised an adviser constituent’s concern over claims management companies, stating that the vexatious complaints brought by such third parties are placing a cost burden on firms and preventing Fos from concentrating on issues of genuine relevance for consumers.
He told the Commons chamber that one of his constituents, Ian Broadbent, director of Blue Sky Mortgages, has had to respond to a “continuous stream of vexatious claims” from CMCs on behalf of clients who have never been sold payment protection insurance by his business.
Mr Dakin said: “That is more than a mere annoyance. When a company disputes a PPI claim, the Financial Ombudsman Service steps in. However, there are clear problems with the way in which disputed claims are handled.”
He warned that businesses are charged up to £850 per cent and, although no fees will be charged for the first 25 claims, the rate at which CMCs generate claims means it is not long before a business has to pay out large sums of money “for doing absolutely nothing wrong”.
Mr Dakin said that Fos investigations “further damage businesses” by dragging claims on, stating that it can take several years for a dispute to be resolved.
He said: “That can be extremely damaging for businesses, with the uncertainty and unpredictability of Fos investigations adding further pressure to businesses struggling to survive in these austere times.
“Businesses have no right of appeal against Fos decisions - a right that consumers and claims management companies retain - and that is at odds with some fundamental principles. Claims management companies can file claims with absolute impunity.
“There are no charges for false claims, and if a claim succeeds, they know the decision is final.”
Mr Dakin highlighted that Mr Broadbent had written to him stating that a client had completed the Fos PPI claim form but stated that he did not recall the sales process so the claim was declined.
Nine months later, a CMC made the same complaint on behalf of the same client, and said that the client had a “clear recollection of the sales process”.
He said: “That was not considered a vexatious complaint and it is being considered by the Fos. It says that it must ignore the original complaint and review it on the basis of the claim submitted by the CMC. That will not strike anyone as a sensible, fair or efficient way to proceed.”
