In January 2014, the Association of Professional Financial Advisers (APFA), the principal trade association for financial advisers in the UK, repeated its call for claims management companies (CMCs) to pay case fees when they forward complaints to the Financial Ombudsman Service (FOS). It will now lobby the FOS and the Financial Conduct Authority regarding this. APFA’s ruling council unanimously agreed this course of action after a meeting at which Tony Boorman, the FOS interim chief executive, was also present.
Under APFA’s proposals, the CMC will need to pay a fee when they refer a complaint to the FOS. However, if the complaint turns out to be valid, the fee will be refunded, whereas fees currently charged by the FOS to firms who are the subject of complaints are not refunded if the complaint is judged to be invalid. APFA also stressed that it wishes the FOS to remain free to members of the public, however one of the issues that has previously been raised when case charges for CMCs are mentioned is that CMCs would pass on the fees to their customers. The FOS used this justification to reject a similar call from the advisory community made in July 2012.
APFA has been concerned for some time about complaints being made by CMCs, many concerning payment protection insurance, where either no such policy was sold or where there is clear evidence to refute claims being made by the CMC. Advisers also claim that they are having to spend valuable time investigating spurious and unfounded complaints, and allege that these complaints are extending the time taken by the FOS to resolve genuine complaints.
Neil Liversidge, an APFA council member and managing director of Yorkshire-based West Riding Personal Financial Solutions, has previously demanded a payment of £3,861 from Hampshire-based CMC Money Claims (UK) Ltd for: the time spent by his personal assistant in scanning documents relevant to their complaint, the time spent interviewing the adviser involved in the sale, the time spent writing letters associated with the complaint and the disruption caused to his family holiday.
On the subject of this decision by APFA’s council, Mr Liversidge said: “The FOS was not set up to be a tool for claim-farmers but that is what it has become, a lever by which they can exert undue influence on advisers and impose on them undeserved costs. If the rules are changed to force CMCs to pay the FOS fee up front they will be forced to properly pre-vet cases. This will reduce the FOS workload, reduce the cost to the sector and also ensure that genuine claims are not unnecessarily in the pipeline behind spurious and fraudulent claims.”
A spokesperson for the FOS said: “We have regularly said that we do not believe charging claims managers would prevent claims being made, as inevitably those costs would be passed on to consumers. Additionally, the number of frivolous and vexatious complaints that are made to the ombudsman by claims managers remains incredibly low.”