The regulator told Mortgage Solutions it had been in an “ongoing dialogue” with Claims Management Companies (CMCs) about how they submitted claims and the need to show evidence of bad advice and the actual material loss suffered by clients.
It added that it was intending to become more publicly proactive when it could see such issues arising in future, in particular using social media and other online channels to educate the public.
Ongoing dialogue with CMCs
In its plan and budget published last month, the FSCS revealed a spike in home finance claims had been driven by template letters from customers through one unnamed CMC.
The bulk of claims were based on the Emptage case in 2013 where the Court of Appeal ruled that the FSCS had a duty to compensate homeowners who had been a victim of bad advice to remortgage and then invest in exotic property schemes which proceeded to fail.
The FSCS noted these form letters received had very little substance or evidence to the claims and that it was seeking to reduce speculative, empty claims before they were made.
FSCS chief corporate affairs officer Alex Kuczynski told Mortgage Solutions, CMCs generally accounted for around 70% of claims not concerning bank deposits.
He believed most CMCs were receptive to working with the FSCS and said the regulator had spoken to the CMC in this case – which it would not name.
“It’s an ongoing dialogue,” he said.
“We were able to say: ‘This is where we think you have set out the basis of a claim and here are examples where you have not. Where you haven’t there’s not much we can do about it, it’s back to you to try to work on’.
“I think they understand what we need and the rules we need to apply.
“Most CMCs have a pretty good relationship with us because it’s important for the consumer the relationship works,” he added.
Identify claimaints or issues
Kuczynski also highlighted that the FSCS was keen to ensure only valid claims were made and that its figures were representing a true picture of the market.
As part of this goal it is intending to take a more proactive approach to educating people about its role and what is required for a valid claim.
“We spent a lot of time, effort and money raising awareness to the public of protection of deposits, but we haven’t done anything like that in other areas so we want to be able to elevate awareness of the FSCS outside that area,” Kuczynski said.
The main route for that will be through online channels, particularly social media where the body has invested in resources, including data to help it identify certain sections of the population.
He said the regulator can focus in on particular claimants or firms that have failed to help where it can.
“We’ve got much more digital sophistication to be able to identify where that population might be, who they are and target them through digital awareness to tell them that the FSCS is here and they might want to contact us directly rather than going through a CMC.”
Mixed bag of claims
Kuczynski was keen to point out that overall the home finance intermediation sector was one of the smallest sources of work for the regulator and the picture was generally positive and steady with the spike now largely over.
“We think we’re coming to a more steady-state for the home finance class,” he said.
“The Financial Ombudsman Service (FOS) has a similarly low claims rate and low uphold rate, so we think we are in tune with that – well below some other cases such as investment or payment protection insurance (PPI).”
He added: “I would say reasons for claims are pretty mixed and the numbers are pretty small, so it’s hard to say there’s going to be a particular theme coming up.
“We are not thinking that there’s one particular strand of claims emerging now from this market.”