In response to the influx of complaints from professional services companies and their low success rates, the Financial Ombudsman Service (FOS) has initiated a consultation on new measures, including the possibility of charging professional representatives for submitting claims that are not upheld. Concurrently, the Ombudsman has proposed reducing the fee charged to lenders for each submitted case by £100.
Recent reports from the FOS indicate a substantial increase in complaints related to motor finance in the three-month period ending in September. This surge has been predominantly attributed to claims submitted by professional representatives, often referred to as claims management companies. Notably, the success rate of these complaints, in terms of being upheld, is relatively low.
FOS data shows that over half of the complaints submitted by professional representatives across various sectors are not upheld. This trend is more pronounced in motor finance complaints, where only 8% of cases brought by professional representatives are upheld, in contrast to a 42% uphold rate for cases submitted directly by consumers.
“The vast majority of motor finance complaints are now brought by professional representatives. We’re seeing a mix of both good and bad practice, but with an uphold rate of just eight per cent, it’s clear some representatives could do more to learn from our established approach about which cases are likely to have merit and advise their clients accordingly,” deputy chief ombudsman James Dipple-Johnstone said.
Dave Briggs (pictured above), managing director at Tandem Motor Finance, welcomed the Ombudsman's data-driven approach. He highlighted the lenders' preference for amicable resolutions to customer complaints and the role of FOS as a free and accessible resolution option.
“There may be a role for professional representatives, some of whom benefit commercially at scale, to resolve financial disputes. However, whether the growing scale of activity relative to its current success levels, particularly in motor finance, is delivering good outcomes for customers is a reasonable question,” Briggs said.
“Implementing a charging regime for professional service companies at a level that encourages more targeted activity has a great deal of merit, particularly for consumers, to provide them with a realistic indication that their case might be upheld successfully. Such a move could also see fewer cases submitted, enabling the Ombudsman to accelerate response times on the worthy instances,” Briggs said.
What are your thoughts on this story? Please feel free to share your comments below.
