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CMC targeting mortgage advice mis-selling with high volume of FSCS claims

  • 31/01/2019
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CMC targeting mortgage advice mis-selling with high volume of FSCS claims
The Financial Services Compensation Scheme (FSCS) has revealed it has been bombarded by a substantial number of mortgage advice mis-selling claims with little or no evidence.


It noted that prospective clients of just one claims management company (CMC) had been sending the form letters with very little substance or evidence and that it was seeking to stop them before claims were being made.

The regulator told Mortgage Solutions that the barrage had been responsible for a substantial increase in mortgage-related claims and a substantial amount of extra work for its teams.

Although it was not able to provide an exact figure, it appears the sole CMC may have been responsible for almost 1,000 extra claims received in the last year.

The FSCS plan and budget for 2019-20 showed 684 claims were expected for last year but 1,605 were received, and the regulator has maintained its estimate for 2019/20 in-line with the previous forecast at 696.


Suitability of mortgage advice

“The FSCS has received a high volume of claims from a CMC on behalf of clients that relied heavily on a template letter and had little variation for each customer,” a spokesman told Mortgage Solutions.

“The claims predominantly related to the suitability of mortgage advice provided to customers but provided little or no evidence to support the claim being made.

“The high volume of claims significantly increased our team’s workload and has created an unnecessary burden on FSCS resources,” he added.

The poor quality and high failure rate of the cases was highlighted by a chart (below) in the FSCS plan which shows the spike in claims and drop in upheld rate.



Efforts to stop claims

In the plan it said: “During 2018/19 we have seen a change in claims made to FSCS with increasing volumes of mis-selling claims being provided with very little substance or evidence to support the claim being made.

“Due to this, these claims have a low uphold rate, which is reflected in the graph above. We are making efforts to stop these claims before they are made and to make clear the evidence we would need to fully investigate the claims.

“This is factored into our forecast which sees the volumes and uphold rates return to their previous levels.

“These changes have not impacted our levy forecast as we continue to receive consistent numbers of upheld claims,” it added.


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