An article in Money Marketing was published in March 2021 with the headline “CMCs fail on 73% of FOS complaints”.
It said statistics from the Financial Ombudsman (FOS) covering the period April 2018 to February 2021 showed:
Only 27 per cent of claims brought by ‘ambulance chasers’ went the way of the claimant…
those seeking compensation for misselling would have a better chance if they went it alone, as they win some 36 per cent of cases when brought directly to the FOS.
Those numbers weren’t wrong – they came from a freedom of Information request to FOS.
But they only tell part of the story and the headline as a result is misleading.
Uphold numbers for affordability complaints
I asked FOS for the recent uphold figures for complaints by product, broken down into claims brought through a Claims Management Company (CMC) and those brought directly by the customer.
Here are the FOS numbers from 1 March 2020 to 1 March 2021:
|All FOS cases||27%||35%|
Why are these numbers so different?
The last line in the table above is pretty much the same as the numbers in the article. But the differences between products are dramatic!
PPI uphold rates have been declining significantly over the last couple of years. The FOS product statistics for Oct-Dec 2020 show:
- the PPI uphold rate had fallen to only 9%. One of the reasons the FCA decided to put a time limit on PPI claims is that many of them are about mis-selling that occurred so long ago there is little or no evidence remaining about the sale;
- the non-PPI uphold rate was 39%.
Claims companies account for a very large percentage of the PPI cases brought to FOS. So the low PPI uphold rate has been reducing the overall CMC uphold rate faster than it brings down the uphold rate for consumers going directly to FOS.
This doesn’t mean that CMCs are doing a worse job than a customer could do on their own – it just means that CMCs have been concentrating on the harder to win PPI cases.
No reason to use a CMC
Most of the affordability complaint numbers in the table above are much the same for CMCs and non-CMCs.
There was only a significant difference for payday loans, the CMC uphold rate was 69%, against 62% for customers applying themselves.
I sometimes see people taking a payday loan case to FOS when they have only had one or two small loans. These are very unlikely to be won, which I point out. But sometimes people still want to try, which is their right, arguing that their situation was so bad no loan should have been given.
So I think what is happening here is that CMCs are better at rejecting some of these cases with very little chance of being won, which makes their uphold rate look better.
My conclusions from the detailed FOS numbers are:
- it is the details of your case that determine whether you are likely to win it at FOS;
- it doesn’t make any difference to your chance of success if you make your FOS claim on your own or through a CMC.
Do CMCs have a useful role?
So what is the point of CMCs, if they don’t improve your chance of winning your FOS case and they take a chunk of any refund or compensation you get?
To people who don’t know where to begin with these complaints, the CMCs are providing a service.
They also pay for advertising that publicises when a complaint can be made. Of course to the banks getting PPI claims and to bad credit lenders getting affordability complaints, this looks like “ambulance chasing”, as the Money Marketing article called them. But if you don’t know you can complain about something, it’s useful to be told!
How to do it yourself with no CMC
All the information you need to make an affordability complaint is on this website. There are separate pages for the different types of debt with template letters for each:
- large loans;
- payday loans;
- guarantor loans;
- doorstep loans;
- credit cards, catalogues and overdrafts;
- car finance.
If your complaint is about insurance or another consumer issue, then your local Citizens Advice may be able to help you.