CompaniesMay 9 2013

A right to redress

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For the financial services industry to repair its reputation, it is important that the victims of mis-selling get back what they are owed. Awarding consumers compensation that is rightfully theirs is undoubtedly important, but it only addresses the symptoms of mis-selling. The crucial point is that consumers get the right advice in the future to ensure they do not fall foul of financial mis-selling again. Where consumers have had good advice, that information strengthens the relationship between client and adviser or provider. In contrast, where mis-selling has taken place – whether that be with endowments, investments, or even packaged current accounts – consumers have the right to have their money returned.

Prime

Let us take payment protection insurance as a prime example. Consumer groups and the Financial Ombudsman Service have worked hard to try to make the claims process for PPI as simple as possible.

Despite this, some consumers still are not making a claim where they have been victims of mis-selling. As many as 25 per cent of those polled recently by YouGov do not feel they have enough knowledge to make a claim on their own and 22 per cent say they do not have enough time.

Calculations by Emcas show that there is still £18.3bn owed to consumers who are yet to act. I believe that those who have been victims of mis-selling are entitled to their money back. Whether done independently or through a professional claims management company, I urge all consumers who have been affected by mis-selling to take action to reclaim what is rightfully theirs.

Because the mis-selling of PPI was so widespread, and occurred over such a long period of time, the scandal has dominated any debate about financial mis-selling and left consumers confused about whether or not they have the right to make a claim.

Ironically the publicity about the PPI scandal has had some unintended consequences. First, we have seen a proliferation of companies who have set themselves up to capitalise on this boom in financial claims. The way in which many have operated (for example, charging fees up front and deluging people with text messages) has been instrumental in turning consumers off from making a valid claim.

Second, many of the providers involved have honed their complaint management processes in an attempt to limit the amount of compensation they pay out. We also see them holding up legitimate claims by rejecting more cases than ever before. Those rejections mean more complaints need an investigation and ruling from the Fos, which in turn can leave consumers facing a considerable wait for their case to be resolved. Understandably, many consumers are put off from taking their case to the Fos at all.

And finally, although some professional CMCs have played a significant role in alerting consumers to the existence of mis-selling and their right to redress, providers have demonised the claims management industry based upon the behaviour of some unscrupulous operators.

This all means there are still millions of consumers who were victims of PPI mis-selling but who have not taken any action. The worrying question is: has the focus on PPI during the last 18 months distracted people from thinking about other products they may have been mis-sold in the past?

Undoubtedly, the claims management industry needs to play its part and raise standards. The PPI debacle has seen the number of CMCs mushroom – and many of these companies do not have the quality of skills and infrastructure that develop through dealing with more complex claims. Professionalising and evolving the industry are vital to ensure that consumers who do not want to tackle their complaint on their own, can turn to a CMC that is equipped to deal with their complaint expertly.

I know that there are a great many advisers providing excellent advice to their clients every day. But in an industry that covers a very wide spectrum of consumer needs, poorly suited products sold en masse through banks and other channels can lead to widespread mis-selling. This is why I believe the key to clearing up mis-selling for good sits with the financial providers themselves.

Unfortunately, they are still making life difficult for consumers. For example, providers are now rejecting around a third of PPI complaints, while they promote the idea of mass vexatious claims. Eight out of 10 PPI cases rejected by providers and subsequently ruled on by the Fos are then overturned in the consumers’ favour.

This clearly demonstrates the banks’ failings when it comes to dealing with PPI complaints. Since April 2010, the average number of cases one CMC has had upheld in favour of the consumer by the Fos sits at 89 per cent and the compensation returned to consumers through these cases is over £10m. This makes nonsense of accusations that claims are vexatious, and rather points to a failure of attitude from providers in resolving their customers’ complaints.

I am concerned that consumers will accept their providers’ initial decisions and, as a result, never get back what is rightfully theirs. This highlights the important role of perseverance – it is essential that consumers are not put off by the process or daunted by taking a claim through the Fos, especially if they are acting on their own.

Education

I believe there is a role for CMCs to play in educating people about financial mis-selling and ensuring that they take action to get their money back. This can mean motivating people to take action, or simply helping them get to the bottom of the financial products they have or have had in the past.

To me, PPI is only the tip of the mis-selling iceberg and there are consumers who may have been mis-sold a broad range of products and who need help. They deserve to know whether they have received good or bad advice and if their products are right for them.

I want to educate consumers to be increasingly financially savvy – something in which all those involved in financial services should have a role. After all, once a consumer has finally succeeded in getting a straight answer from their provider, weathered the initial rejection, escalated their complaint to the Fos and waited for the backlog to clear before getting their complaint upheld and their money back, it seems pretty important that they can then confidently go on to seek sound, professional financial advice, which we all know is available. Then we will all have succeeded.

Craig Bernhardt is chief executive of claims management firm Emcas

Key points

- For the financial services industry to repair its reputation, it is important victims of mis-selling get back what they are owed.

- Many providers have honed their complaint management processes in an attempt to limit the compensation they pay out.

- Providers are now rejecting around a third of PPI complaints, while they promote the idea of mass vexatious claims.