I never thought I would be writing about Payment Protection Insurance [‘PPI’] in this magazine, but since the expiry of the deadline for PPI claims all the media (broadsheet, tabloid and industry) has been awash with speculation about what financial products will Claims Management Companies [‘CMCs’] move into next. Frankly, some of the commentary has been hysterical. Although maybe that is not totally surprising, as the reprobate end on the CMC market tarnished the reputation of genuine companies. After all, who hasn’t become exasperated by unsolicited and often illegal telemarketing adopted by some rogue firms and the kneejerk reaction against all CMCs can, maybe, be understood. However, such a reaction is illogical – the CMC feeding frenzy was created by the financial service industries own making.
Our industry could have put CMCs out of business at birth, all the industry had to do was to fully embrace all aspects of treating customers fairly [‘TCF’], throughout the product lifecycle. TCF should have been the key focus from the product concept stage through product design, marketing, sales and after care but we know it wasn’t the case. CMCs cannot be blamed for aggressively selling the highly profitable insurance to as many customers as possible, including to those who were ineligible or were not aware they were buying it. And when then when sales errors were first identified rather than treating customers fairly and appropriately providing redress to wronged customers it was the banking trade associations tried to avoid their responsibilities by seeking a judicial review against the rulings of the FSA and FOS. Even today, the media is full of stories of providers making it difficult for customers to complain and/or looking for loopholes to wriggle out of doing the right thing.
the media speculations regarding future CMC ‘hunting grounds’ are voluminous
The 10 statements of principle (which include the fair treatment of customers) are as old as the FSA, TCF has been a regulatory theme since at least as early as July 2004 and the Senior Managers and Certification Regime [‘SM&CR’], albeit in its previous incarnation the Approved Persons Regime [‘APR’], has required a ‘fitness’ test since 2007. So, goodness knows why the industry keeps scoring own goals and playing into the hands of CMCs, but it does. So what is next?
Notwithstanding the fact that CMCs now need to digest the huge surge of last-minute PPI claims, the media speculations regarding future CMC ‘hunting grounds’ are voluminous; there doesn’t appear to be any product that the media has not put on its ‘watch list’. However, the consensus highlights two most likely target areas, Packaged Bank Accounts [‘PBAs’] and mortgages. I do not agree with this assessment. Firstly, the redress in PBA cases is often small and I struggle to see how CMCs can manage them commercially. Secondly, information provision in respect of mortgages has been ‘tight’ for many decades initially via ‘reason why’ letters linked to The Mortgage Code and latterly via Initial Disclosure Documents [‘IDDs’] and Key Features Illustrations [‘KFIs’]. Lack of information provision, after all, was a key element in the mis-selling of PPI.
Despite my optimism, I would also advocate ‘now’ is always a good time to review compliance with key FCA themes. In respect of TCF, is your firm really living up to what TCF is meant to deliver and do your procedures and policies embrace positive consumer outcomes throughout a customer journey? In respect of SM&CR, do seniors managers know and understand their responsibilities and do ‘certificated’ staff really embrace the way the business states its customer values or are they inappropriately motivated to ‘get the sale’ ahead of ‘doing the right thing’? Get this right and consumers will not need to turn to CMCs again!