Payment Protection Insurance and Claims Management Regulation

NB: this guidance does not affect your obligation to respond as fully as possible – within the information provided – to complaints you receive regarding PPI and it is important that you take up any complaint against a claims management company as a separate issue.  

Introduction

Since the major banks conceded defeat in the legal challenge over the mis-selling of Payment Protection Insurance (PPI) and began making compensation payments to those affected, credit unions that were providing CUNA Mutual’s PPI product have been receiving complaints also.  However, the complaint around PPI mis-selling relates to PPI sales practices – such as the implication that the product was required for a successful loan application, its limitations were not properly explained or the payments to cover it were combined with loan repayments and interest charged – that, in the case of most credit union sales, did not happen.  Indeed, CUNA Mutual’s assessment of the product’s features and sale shows that it performs very well in comparison with others.

Many claims management companies, however, are actively encouraging individuals to complain with a view to gaining compensation without exploring the facts of the case, purely on the basis that the product is PPI and therefore it must have been mis-sold.  This is reinforced by the decision taken by the major banks to settle most claims without disputing them.

Many of these speculative claims do not provide any real detail of the facts of the case, recycle extensive standardised information which does not relate to the specific case and, in some cases, do not even specifically relate to a PPI sale – just the possibility that there was one.

What follows provides information as to how credit unions can complain about malpractice on behalf of claims management companies in respect of speculative PPI complaints.

PPI and claims management regulation

The Financial Ombudsman Service (FOS), which deals with PPI complaints that remain disputed, and the Ministry of Justice’s Claims Management Regulation Unit (CMRU), which regulates claims management companies, have both issued extensive guidance on how the industry should conduct PPI complaints, underpinned by its legal obligations as a regulated industry.

The key expectations relevant to PPI claims received by credit unions are:

• that as much specific information as possible relating to the particular details of the complaint in hand is provided – such as the specific grounds for the complaint and unique identifier information for the individual concerned.
• that the company makes sufficient efforts to investigate the grounds for complaint before issuing it to the provider (i.e. credit union).
• that the company does not use extensive standardised information which, in the vast majority of cases, will be irrelevant to the facts of the specific case.
• that the company does not file entirely speculative complaints which do not contain detail of any particular sale but request information from the firm as to whether they sold PPI to their client.
• that the company complies with the FOS’s standardised complaints procedure and has their client complete a specific PPI complaint form which is provided on the FOS website.

CMRU has issued a (link is archived) letter to claims management firms which states categorically, in relation to some of the points raised above, that:

“The Financial Ombudsman Service has indicated that the issues above may cause delays or even lead to them declining to handle a case. If you use any of these it is important that you now review your business model to ensure that you respond to the concerns raised by the Financial Ombudsman Service. The Conduct of Authorised Persons rules require you to act responsibly [general rule 2] and to ensure the service offered is one that meets the needs of its clients [client specific rule 1(b)]. The use by any business of these techniques may now be a breach of these rules as businesses have been informed it is likely to result in the Financial Ombudsman Service refusing to deal with their client’s case. Breach of the rules can lead to suspension or even cancellation of your authorisation.”

Therefore, if a credit union is receiving PPI complaints from claims management companies which fail to adhere to the expectations outlined above they may well be in breach of their legal obligations and could potentially have their authorisation cancelled by the Ministry of Justice.

Making a complaint against a claims management company

As with complaints against a credit union, to make a complaint against a regulated claims management company you must first make the complaint direct to the company itself providing as much specific detail as possible and allowing the company 8 weeks to provide an adequate response.  Only after this point will the CMRU accept a complaint filed to it.

The more specific you are able to make the complaint and the more you are able to document, the more likely it is to a). concern the claims management company enough to change its practices and b). be taken seriously by the CMRU should the company itself fail to respond adequately.  It is also advisable to quote in any complaint the guidance letter provided by the FOS and the letter cited above from the Ministry of Justice CMRU.

Should the claims management company fail to respond adequately to your complaint you can then file the complaint with the Ministry of Justice Claims Management Regulation Unit (CMRU) at the following addresses:

business@claimsregulation.gov.uk

Claims Management Regulation Unit
57-60 High Street
Burton upon Trent
DE14 1JS

Conclusion

Speculative, incomplete and standardised complaints made by claims management companies could well constitute a breach of such companies’ obligation to act responsibly and in the best interests of their clients.  Therefore, credit unions that receive such complaints may lodge a formal complaint against these companies.

Though there is no guarantee that claims companies will amend their practices in light of your complaint or, indeed, that the CMRU will act upon them, we hope that this will be a useful tool in guarding against time consuming complaints which have no reasonable basis; the administration of which has been a burden upon some credit unions.

NB: this guidance does not affect your obligation to respond as fully as possible – within the information provided – to complaints you receive regarding PPI and it is important that you take up any complaint against a claims management company as a separate issue.  

ABCUL – February 2012