OpinionJul 2 2014

Consumer rights should have no ‘best before’ date

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It is ticklish question – and one with strong arguments on both sides.

Derek Bradley, chief executive of Panacea Adviser, highlighted the case of an adviser whose details have been revealed by the Financial Services Compensation Scheme nine years after he retired.

The complaint relates to a mortgage endowment sold in 1989 which on a 25-year basis would have matured this year.

The argument is that any complaint should have been timed out.

The adviser has complained to the Information Commissioner, but the FSCS says it acted in line with general guidance from the commissioner’s office.

I do not know the ins and outs of this particular case, but the general principles are important.

The industry – aided and abetted by regulators – attempted to draw a line under the endowment scandal.

But as some prominent IFAs have pointed out in the past, there is no quantifiable shortfall on an endowment until the day it matures.

Even if someone was mis-sold an endowment, it may still produce enough to repay the mortgage. Therefore, if the product has done its job and was not more expensive than alternative repayment methods, why bother complaining?

But the consumer who waits and sees is then ruled out of time.

Financial advisers gave advice on products that ran for 25 years and would presumably be paid commission throughout that period.

Yet they now argue they should be able to walk away after six years under longstop agreements.

Advisers argue they should be able to walk away after six years under longstop agreements

Consumers, on the other hand, cannot reasonably argue they knew nothing about the endowment scandal. If they hold an endowment, surely they should have made the effort to consider how it was sold to them and how it might perform.

So should someone now be allowed to track down an adviser who retired nearly 10 years ago and whose firm has closed down?

I certainly would not expect a reader to phone me 10 years into retirement and hold me to account for something I wrote a decade previously.

But then I would not be drawing commission. I have not given face-to-face advice, discussed the personal circumstances of the individual or claimed to be their independent adviser.

It is a difficult balancing act. However, when everything is taken into account, the rights of the consumer must outweigh the rights of the person who has offered and been paid to provide a professional service.

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Know Fos and lose the lawyers

The Financial Ombudsman Service regularly comes in for criticism from the industry it arbitrates.

But it undoubtedly helps to create confidence among consumers who feel their complaints will be dealt with fairly.

When the financial services industry fails to handle complaints professionally it can result in a free for all, as evidenced by the number of claim handlers pursuing payment protection insurance cash.

In contrast to claim handlers, the ombudsman investigates complaints sensibly. Decisions are based on fairness and common sense – and they can usually be understood by consumers.

This is why businesses would do well to familiarise themselves with the decision-making process. If you know what the ombudsman is likely to award, you can take a similar approach and potentially save your business a lot of time and money.

Of course, I am taking a common-sense approach myself here and ruling out the inevitable involvement of lawyers and insurers, both of which have a vested interest in stringing out complaints and making resolutions as complex as possible.

I find it astonishing that we have had ombudsmen for more than 25 years and yet some firms still try to rest on points of law, ignoring ombudsman guidance.

The ombudsman website has updated guidance showing its approach to non-financial losses to make sure it reflects “what fairness means today, in the light of changing customer expectations and businesses practices”.

Most interesting is the section giving guidelines on payouts. It all seems eminently sensible, but then I am not working as a lawyer for an insurance company.

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The high price of saintliness

So more tax will soon be taken from savers than from sinners. Well there is a surprise.

An analysis, published in the Daily Telegraph, focuses on inheritance tax, stamp duty land tax and stamp duty on shares, which between them are expected to raise £21.9bn in the 2015/16 fiscal year.

The reality is that savers already pay far more through taxation of interest and capital gains. But it makes a nice headline and gives the government something to think about ahead of the next general election.

Tony Hazell writes for the Daily Mail’s Money Mail section

t.hazell@gmail.com