Financial Ombudsman Service  

CMCs warned not to bother Fos

CMCs warned not to bother Fos

The regulator has warned claims management companies not to hassle the Financial Ombudsman Service with PPI complaints while banks scramble to sort out high volumes of claims.

In a letter to CMCs, sent today (October 17), the Financial Conduct Authority told the firms they needed to “take all reasonable steps” to investigate the merits of a complaint before referring it to the Financial Ombudsman Service.

The letter said the mass of PPI complaints received by banks in the lead up to the PPI deadline on August 29 meant the lenders affected were acknowledging and responding to enquiries more slowly than usual.

Technically a complainant — or a CMC acting on their behalf — can refer their complaint to the Fos after eight weeks if they have not received a final response from the firm.

But the FCA warned CMCs it expected them to “act responsibly and professionally” and allow lenders a “reasonable amount of time” before taking the complaint further.

The letter stated: “In considering what is a reasonable amount of time for a lender to provide a final response to a PPI complaint, we will consider the current very high volumes and operational challenges. 

“We would expect CMCs to do the same.”

The FCA said it understood typical response times to PPI complaints could sometimes stretch well beyond 24 weeks and suggested CMCs waited at least three months before referring a complaint on.

The City-watchdog had previously told lenders that in the current circumstances it regarded fair, consistent outcomes as the clear priority and not the speed of complaints handling and added in today’s letter it was important CMCs played their part in helping ensure this.

On top of this, if the Fos decided a PPI complaint had been referred to it without the lender being given a reasonable opportunity to respond the service was likely to return the referred case to the CMC and urge them to work with the lender, the FCA warned.

The FCA began regulating CMCs from April 1 this year, introducing stricter requirements on firms operating in the market.

In today’s letter, the regulator highlighted that CMCs should be complying with its financial promotion rules and warned the firms not to promote their claims company in a misleading, unclear or unfair manner.

This was after the FCA had spotted adverts which had mislead consumers into thinking the particular PPI claim would go through the ombudsman service when it would in fact be a court matter.

PPI, which was missold to thousands of consumers from as early as the 1980s, was sold alongside finance agreements which insured payments were made if the borrower was unable to make them due to sickness or unemployment.

The full extent of the misselling of PPI was exposed in 2005/06 when the Financial Services Authority — now the FCA — started fining banks over the sale of such protection.

It has since emerged that the misselling was fuelled by staff incentive schemes and a sales culture which led to bank staff being put under heavy pressure to sell PPI and some senior bonuses depending on sales rates.