A consultant has criticised the Financial Ombudsman Service for industrialising the complaints process by making assumptions about complainants.
Mark Davies, director of Davies, Duffy & Smith Consulting, wrote to the Treasury Select Committee regarding his involvement in a recent Channel 4 Dispatches programme which was critical of the Fos.
Dispatches - which focused on payment protection insurance (PPI) - alleged investigators the ombudsman had been churning out decisions as they scrambled to meet targets and that it had not been "feasible" to handle all the claims.
In some instances, it is alleged, staff did not know the products they were dealing with and sometimes just found in favour of the bank which was deemed "easier".
The Fos has denied the allegations but has agreed to submit itself to an independent review.
Mr Davies, who contributed to the programme, was critical of the Fos practice of, in some cases, assuming a complainant would have bought PPI anyway, regardless of the cost or value of the product.
He said: "The evidence indicates that half-a-million PPI complainants have been unlawfully denied redress by Fos.
"The speculation that the victim would have proceeded anyway has been used to reject complaints from an early stage.
"However, this kind of decision making could certainly be useful if one was in a hurry, or wanted to simplify things: because one just needs to conclude the client would have proceeded anyway and move on. It is also easy to industrialize, using a system, or a set of corporate policy decisions, presumptions, or simple rules."
Mr Davies pointed to the fact that the proportion of PPI complaints which have been upheld has been falling over the past three years - from 73 per cent in 2015 to 35 per cent in 2017.
He said this was "deeply alarming" and said there was "no doubt" the PPI policies which had seen their complaints rejected had in fact been mis-sold.
Mr Davies said: "At a reasonable estimate, the number of affected consumers is rising, and will continue to rise, at a rate of 7,000-10,000 per month."
Many of the PPI claims for compensation were submitted by claims management companies.
Mr Davies' firm Davies Duffy & Smith Consulting in 2015 prepared a submission on behalf of claims management company We Fight Any Claim to the government review of how these companies are regulated.
In this submission Davies Duffy & Smith said CMSs were "benefitting consumers", despite being portrayed as "ambulance chasers" and it argued against measures such as a price cap.
In his letter to Treasury select committee chair Ms Morgan, he added: "[The Financial Conduct Authority] have since asserted, from time to time, that 'not all PPI was mis-sold'.
"I do not doubt this belief has been sincere, if convenient. But FCA have never said how much was not mis-sold; or identified any relevant groups of cases and adduced them as evidence."
The allegations in the Dispatches programme have been strenuously denied by the Fos, which said there is little evidence of bias in favour of banks, since around two thirds of cases are found in the consumer's favour in PPI complaints.
It also said that on joining the Fos, all new case handlers take part in a comprehensive training programme – including a session with chief ombudsman Caroline Wayman about the role of the service and the values of independence, impartiality and fairness.
This also involves six months in the Fos's training academy which includes aspects of the law and regulation which are relevant to their work. It also covers product-specific knowledge, evidence gathering skills, how the service work and the standards it requires.
Ms Wayman said: "We do, of course, have a well-established quality assurance framework – from undertaking several thousand checks on cases every month to detailed file review sessions with our executive team and non-executive board.
"More broadly, our case-handling process itself provides for a series of checks and balances. As a first step, our casehandlers listen to both sides, carefully weigh up the facts and evidence, and suggest a fair way forward.
"If we think the consumer has been treated unfairly, then we will tell the business to put things right. But if either side disagrees with this initial view, then they have the right to ask for everything to be reviewed afresh by an ombudsman who will make the final decision. This is essentially the 'appeal' stage of our process."
damian.fantato@ft.com
