ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.
The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.
June / July 2011
Just under half of all the cases brought to us come direct from a consumer (or small business). The remainder are brought to us by a third party. In the last financial year, around 5% of our overall caseload consisted of cases referred to us on behalf of consumers by professionals such as solicitors or accountants. And around 45% of cases are referred to us by claims-management companies.
This follows steady year-on-year increases in previous years – and is broadly in line with the growing volumes of complaints relating to payment protection insurance (PPI), where claims-management companies are most active. 76% of the 104,597 new PPI cases we received during the last financial year were brought by claims-management companies.
We have always stressed that consumers do not need help from a commercial third-party – such as a claims-management company or solicitor – in order to bring a complaint to us. We decide complaints by looking at the facts in each individual case, not at how well the arguments are presented, and we prefer to hear from consumers in their own words.
We aim to make it as easy as possible for people to use our service. And our research shows no difference in the outcome of cases, whether consumers bring them to us themselves direct, or pay someone to complain on their behalf. We are a free service for consumers – but commercial companies charge consumers for bringing a complaint for them. However, it is a matter of individual choice if a consumer wishes to employ a third party to act on their behalf.
Of course, not all ‘represented’ consumers pay for someone to bring a complaint on their behalf. We continue to deal with cases referred by family members, friends, colleagues and consumer advisers who help people for free if they need assistance in making a complaint. This includes more vulnerable people who rely on the support of others – from councillors and trading standards officers to care home managers and community workers.
The following case studies illustrate some of the complaints brought to us on behalf of individual consumers by a range of different third parties.
After seeing on the TV news that some people were having problems with PPI (payment protection insurance), Mrs J started to have concerns about her own PPI policy. As it had been sold to her alongside her credit card, she contacted her credit card provider and asked if it would check whether the policy was right for her circumstances.
Mrs J was a single parent with two teenage children and she worked as a self-employed beautician. Over the previous year she had been obliged to cut down her working hours quite considerably. Caring for her elderly father was taking up much of her time, as he was in poor health and becoming increasingly frail.
Her credit card provider told her that if she was concerned about the suitability of her policy, she would have to make a formal complaint. She therefore did this – and in due course received a complex three-page letter from the card provider’s legal department. The letter was aggressive in tone and it vigorously refuted Mrs J’s complaint, telling her she would have to ‘provide compelling evidence to support any allegation of a mis-sale’.
Mrs J was confused by this response. It had not been her intention to complain about the policy being mis-sold. She did not know whether that was the problem – or indeed whether there was a problem. And she was unsure what ‘evidence’ she would need to produce in order to pursue matters.
She was still wondering what she should do when an advert in the paper caught her eye. It was from a claims-management company that said it specialised in helping people with PPI claims. Mrs J liked the idea of having an ‘expert complaints handler’ who would ‘look after everything’, particularly as caring for her father was now so time-consuming. So she rang the claims-management company and arranged for it to take on her case.
The company contacted the credit card provider on Mrs J’s behalf but found it was unable to make much progress. The card provider insisted that it would have given Mrs J all the information she needed in order to make an informed choice about whether to take out the policy. However, it said it had no paperwork relating to the sale of the policy. It appeared unable even to confirm when the sale had taken place. So the claims-management company told Mrs J it would refer the complaint to us, on her behalf.
The claims-management company helped Mrs J complete our PPI questionnaire, giving us the details we need to look at a PPI complaint.
Mrs J said she had not taken out PPI when she first obtained her credit card. She was persuaded to do so some while later, when she rang her card provider to ask for an increase in her credit limit. During that call she had been asked to confirm details of her employment and had said she was a self-employed beautician.
She was certain no one had told her that self-employed people could get only limited benefits from the policy.
Together with the completed questionnaire, the claims-management company sent us some information about Mrs J’s business – and copies of two of her credit card statements. One of these statements dated from late 2001, before she had the PPI policy. The other statement was from early 2002 and showed the increased credit limit and a PPI payment.
We asked the credit card company to send us a copy of the terms and conditions that applied to its PPI policies in early 2002. It was clear from this that the circumstances in which a self-employed person could make a claim under the policy were very limited. This was a significant factor – and the credit card company should have made it clear. However, it was unable to provide any evidence that it had discussed the limitations of the policy with Mrs J.
We concluded that it was very unlikely she would have taken out the policy if she had been properly informed. We upheld the complaint.
Mr G was relaxing at home when he got a phone call from a claims-management company. He had not had any dealings with the company before – and he later said he had been annoyed at first to have his evening interrupted. However, he soon became interested in what the company told him.
He was asked if he had ever had a personal loan. When he said that he had taken out a loan ‘sometime around 2003’ but had now repaid it, he was told it was ‘highly likely’ that he was entitled to compensation.
The claims-management company urged him to ‘act quickly’ and said it needed him to answer a few questions over the phone, so that it could complete a PPI (payment protection insurance) questionnaire for him. Mr G was not at all sure that he had taken out a PPI policy – and his answer to most of the questions he was asked was ‘I don’t remember’. However, the claims-management company assured him that it was ‘confident of a positive result’.
Acting on Mr G’s behalf, the company then sent a complaint to Mr G’s loan provider, saying it had mis-sold a single-premium PPI policy when it gave him the loan. The loan provider responded by stating that it had no record of ever having sold PPI to Mr G. It enclosed with its letter a copy of Mr G’s loan agreement.
The claims-management company then referred the complaint to us. It told us the loan provider had persuaded Mr G to take PPI by telling him it was essential if he wanted to obtain a loan. The company also told us that the loan provider had failed to explain the cost of the policy to Mr G, or to draw his attention to the limitations on the policy benefits.
complaint not upheld
We asked the loan provider for information about its dealings with Mr G. It said it had only ever supplied him with one loan, which he had since repaid, and it had never sold him a PPI policy. It sent us a copy of Mr G’s loan application and details of his payment history. Mr G had indicated clearly on his application form that he did not want PPI. And there was nothing to suggest that he had ever paid more than the monthly repayment amount shown on the application form.
We asked the claims-management company to send us any evidence it had to show that Mr G had taken a PPI policy. It was unable to do this.
It is understandable that consumers can sometimes be uncertain whether or not they were ever sold PPI in the past. In this instance, however, we noted that the loan provider had given the claims-management company clear evidence that it had never sold PPI to Mr G. We did not uphold the complaint.
In accordance with our rules, we decided the case was ‘frivolous and vexatious’ – which is how we categorise fewer than 1% of the cases we decide.
At her bank’s suggestion, Miss T took out a consolidation loan to help her repay an existing loan and a sizeable credit card debt. Two years later, she was forced to give up work because of ill-health. She was soon finding it difficult to manage the monthly loan repayments, so she decided to ring the bank and ask if she could reduce the payments.
She had expected the bank to agree right away, once she explained her circumstances. So she was taken aback when the bank told her it was ‘unable to say’ if it would be able to do as she asked. It said it would send her a form called a ‘common financial statement’.
She would have to complete this, giving details of her income and expenditure, and then get the statement ‘verified’ by a debt advice agency before returning it to the bank. The bank would then consider her request.
The statement arrived a few days later and Miss T began to fill it in. However, she left it unfinished because she couldn’t work out what she needed to do with the form once it was completed. She had never heard of debt advice agencies and didn’t know how to go about finding one.
She therefore thought it a stroke of luck when, later that same week, she heard an advert on the radio for a claims-management company, offering to help people sort out their financial problems.
Miss T rang the company and was told it could ‘deal with the bank’ on her behalf. After taking detailed information from her about her income and expenditure, the company got in touch with the bank. However, it was far from happy with the bank’s response, so it told Miss T it would refer the case to us.
complaint resolved informally
The work that the claims-management company had already done with Miss T, setting out the details of her financial circumstances, meant we did not need to start from scratch in obtaining this information. And we were able to assess very quickly that Miss T’s circumstances warranted some flexibility by the bank over her loan repayments.
We contacted the bank to explain Miss T’s current circumstances and to remind it of its duty under the Lending Code to behave positively and sympathetically to consumers in financial difficulties.
The bank then told us it was prepared to accept lower monthly repayments. It also offered a concession regarding interest payments. And it said it would refund any charges it had applied to Miss T’s loan account since she first contacted it about the change in her circumstances.
We thought this was a fair offer and we passed on the details to the claims-management company. Shortly afterwards it accepted the offer on Miss T’s behalf. Miss T then rang us to say how pleased she was with the outcome. She was aware she would have to hand over to the claims-management company some of the money she got back from the bank. She said she was happy to do this, as she would not have had the confidence to pursue matters on her own – particularly given the bank’s initial response, which she had found ‘unhelpful and intimidating’.
We upheld the complaint about payment protection insurance (PPI ) that was brought to us by a claims-management company, on behalf of Ms A. We told the business responsible for mis-selling the policy that it should:
The business offered to reduce the balance on Ms A’s loan by £10,200, in order to remove the remaining PPI premium. It said it would also give her a cash payment of £2,100. We put this offer to Ms A’s representative, saying we thought the offer was fair and reasonable.
Not long after that we had a phone call from Ms A. She said she had been very pleased when the claims-management company told her about the offer. However, she was now worried about the consequences, if she accepted it. She had only just learned exactly how much the claims-management company would be charging her for its services. She said it had asked her to pay £3,690. It had explained that this was 25%, plus VAT, of £12,300 (the overall value of the offer).
Miss A said that to pay this fee she would have to hand over all of the £2,100 she would get in cash, as part of the offer. She would then need to find a further £1,590 to make up the total amount she owed the claims-management company.
She told us she thought this ‘fundamentally unfair’ – particularly as she would have no option but to take out another loan in order to obtain the £1,590. She asked if she could make a complaint to us about the claims-management company, as she said its charging structure was far from clear, and it had failed to explain exactly how its fee would be calculated.
It is not part of our role to look at complaints about claims-management companies, which are regulated by part of the Ministry of Justice. So we explained to Ms A why we were unable to help her further. We suggested that she could contact a free local law centre and get a legal view about her contract with the claims-management company.
Because we were seeing comments from a number of consumers regarding the fees of this particular claims-management company, we highlighted the issue as part of the regular dialogue we have with the Ministry of Justice.
Since his working hours had been reduced, some months earlier, Mr M had been finding it more and more of a struggle to afford the monthly repayments for his loan and credit card debts.
Out of the blue he received an email from a claims-management company, describing the many successes it had achieved in helping consumers with debt problems.
Mr M’s curiosity was aroused, so he rang the company and explained the financial problems he was having. The person he spoke to seemed confident that the company would be able to help him, so he asked what kind of help he could expect and how much it would cost.
He was told he would need to pay a ‘modest initial fee’. The company would then contact his loan provider and credit card providers and make a complaint on his behalf. The company seemed to think that – as a result of this – at least some of Mr M’s debts would be written-off. The claims-management company would then charge him a percentage of those written-off debts.
Mr M resisted pressure from the company to sign up for its services right away. He later told us he had doubts about what the company would actually be able to achieve for him. He had been perfectly happy with his loan and credit cards before the drop in his income. He was therefore uncertain what grounds there would be for any complaint.
Mr M discussed his worries with his daughter, the next time she visited him. She told him that one of her work colleagues had recently told her about the Financial Ombudsman Service. This colleague had picked up one of our leaflets when he’d visited our stand at a local consumer event. From what she’d heard, she thought it would be worthwhile for Mr M to give us a call.
The next day, Mr M phoned our consumer helpline. He explained his worries about his debts and he told us about his conversation with the claims-management company.
He said he was concerned that by paying the company’s initial fee he would be ‘taking a gamble’. It could result in his financial situation getting worse than it already was. From what he understood, the fee was non-returnable – and he was not convinced that any of his debts would be written-off. He was also nervous about the company’s insistence that he should sign a legally-binding contract before it started work on his behalf.
Our consumer consultant explained to Mr M that we could not give specialised legal or debt advice. And we were unable to discuss individual claims-management companies. But we said that from what he had told us, it seemed unlikely that his were the kind of circumstances in which we would say the lenders should write-off his debts.
We said that, before he committed himself to anything, Mr M might find it helpful to see a qualified, free, debt adviser. We gave him contact details for several reputable agencies that could help him – free of charge – to deal with his debt problem. We also explained that, if necessary, these agencies could contact his creditors on his behalf.
Mr M thought this was a much better option for him. He did not want to avoid paying his debts. And he didn’t honestly feel he had cause to complain about his lenders. He just needed some expert help to arrange an affordable level of repayments.
Mr K, a retired postal worker, was alarmed when a debt-collecting business wrote to him about money that it said he owed to a credit card company. He was not sure how the business had obtained his details as he was certain he did not owe any money. However he was very anxious that the debt-collecting business might refuse to accept that it had made a mistake.
When it wrote to Mr K, the debt-collecting business had enclosed a leaflet about a separate, free service that provided debt advice. The debt-collector’s regulator required it to provide such information in these circumstances.
After reading the leaflet, Mr K decided that before responding to the business, he would phone the debt advice service. He was pleasantly surprised when the advice worker he spoke to, Mrs C, said she would contact the business on his behalf.
Initially, she was unable to get the business to accept that it had made a mistake. But after she had made a number of phone calls to the business and sent it several letters, it eventually accepted that it had been chasing the wrong person.
Mr K was relieved about that, but he told Mrs C that he was worried his credit history might now contain incorrect information about the debt. He also felt that he was entitled to what he described as ‘significant compensation’ for the worry that the debt-collecting business had caused him.
Mrs C contacted the debt-collecting business again but it said it was unable to deal with any questions about Mr K’s credit history and, ‘as a matter of policy’, it never offered any compensation.
After discussing the situation with Mrs C, Mr K gave her permission to complain to us on his behalf about the debt-collecting business.
We told the business that it was responsible for ensuring its mistake had not resulted in any inaccuracies on Mr K’s credit record. We said the business should also apologise to Mr K for its error in chasing him for the debt.
We agreed with Mr K that he was entitled to receive some compensation for the difficulties the business had caused him. However, we thought the amount he appeared to be expecting was excessive.
We phoned Mrs C and explained our approach to compensation for non-financial loss. We told her we thought a payment of £250 would be fair and reasonable in this particular case.
Mrs C said she would pass on our comments to Mr K when he visited her office the following week. And a few days after that, she wrote to us. She said Mr K was disappointed that he would not get the large sum he had been hoping for. However, he would agree to accept £250. When we told the debt-collecting business this was an appropriate sum, in the circumstances, it sent Mr K a cheque for this amount.
Mr W, who had three small children, lost his job just a short time after the breakdown of his marriage. Uncertain what benefits he was entitled to receive – and anxious to ensure that proper arrangements were made for him to see his children – he visited his free local advice centre.
He was very impressed with the practical assistance he received from his caseworker at the centre, Miss G. With her help he was soon able to sort out his most pressing concerns. However, his financial situation remained a worry.
A couple of months later he returned to the advice centre. This time he saw a different caseworker, Mrs L. He explained that although he had managed to get some work, it was only part-time. He was anxious not to get further into debt, but was struggling to meet his current commitments.
After taking a detailed look at Mr W’s situation, Mrs L suggested that he might have grounds for complaint about a payment protection insurance (PPI) policy, which had been sold to him with a loan some years earlier. She said that if she was right, Mr W might be due some compensation.
However, it was not at all clear which financial business was responsible for selling the policy. The business from which Mr W had obtained the loan did not appear to exist any longer. From what Mrs L could make out, it had been taken over by another company – which had in turn either been taken over itself or completely re-branded.
Only a few weeks earlier, Mrs L had attended one of the consumer advisers’ training days that we run in different regions of the UK. As a result, she had a good understanding of the work of the ombudsman service and the kinds of help we can provide. She rang our consumer helpline while Mr W was still in her office and we were able to have a three-way conversation.
After asking them both a few questions we established which financial business the complaint needed to be sent to. We said we would arrange this by writing direct to the business on Mr W’s behalf. We confirmed that we would ask the business to send a copy of its reply to Mrs L, as requested by Mr W. And we explained that if the financial business had not resolved matters within 8 weeks, then Mrs L or Mr W should let us know.
We heard no more until – several months later – a colleague of Mrs L’s attended one of our training sessions for frontline advice workers. He said he had signed-up for the event on Mrs L’s recommendation. He was aware of Mr W’s case and told us that once the business became aware of our involvement, it had dealt with it speedily and satisfactorily.
Miss C was very worried when she discovered that her account with a catalogue-shopping business was in arrears. She had been a customer of the business for several years, buying clothes and household goods by mail order and paying in monthly instalments.
She had always taken care to make her payments promptly and in full, so she was certain there must have been a mistake. However, she was reluctant to get in touch with the business as she had only a very basic level of literacy.
She was worried that if it proved impossible to sort matters out over the phone, she would then need to deal with complicated paperwork.
Miss C’s neighbour, Mr H, was aware of her difficulties with reading and writing. When she told him about the problem, he offered to get in touch with the business on her behalf.
Unfortunately, even after making a number of phone calls to the business and writing several letters, Mr H was unable to resolve matters. The business did not appear to accept that it might have made a mistake. It simply kept repeating what it had told Miss C when it had first written to her – that her account was in arrears and that she needed to bring her payments up to date. So Mr H got in touch with us.
complaint resolved informally
We arranged to talk to Miss C over the phone, so we could gather some information from her about her account. She gave us the details we needed and confirmed she was happy for us to deal direct with Mr H.
The information we obtained from the business enabled us to establish that the problem had come about after it mis-applied one of Miss C’s regular payments. The business had then assumed that she had failed to pay that month – and it had started adding late payment fees and other charges to her account. By the time Miss C became aware of what had happened, the total charges had risen to over £100.
As a result of our intervention, the business offered to remove all the charges. It said that in view of the worry and inconvenience caused to Miss C by its initial error – and by its subsequent failure to put matters right – it would credit her account with £50. We thought that was a fair outcome and Miss C was happy to settle the complaint on that basis.
Mr B went to Spain with a group of friends, combining a belated celebration of his 21st birthday with a stag weekend for his former flat-mate.
Not long after he returned home he received his credit card statement. This showed several transactions that he did not recognise. Totalling almost £800, these transactions were all made on the same date at a 'gentlemen’s nightclub’ in the Spanish city he had just visited.
Mr B showed the statement to his mother and said he thought he must have been the victim of a fraudster. He said he had visited a number of bars while he was in Spain, but had certainly never been to this nightclub.
His mother told him to contact his credit card company right away and query the transactions. He said he would do this. However, several weeks later his mother found he had still not got round to it, so she offered to sort things out for him.
After checking that Mrs B had her son’s permission to act on his behalf, the credit card company told her there was nothing to suggest the transactions were fraudulent.
Mrs B thought the credit card company should ‘investigate more thoroughly’. She said it was clear that the transactions had been made by someone other than her son – and she wanted the card company to pay back into her son’s account the total amount under dispute.
The credit card company refused to do this. It said it had no reason to suppose the transactions had not been made by Mr B, as his PIN had been entered correctly each time.
Unable to resolve matters, Mrs B eventually referred the complaint to us. She said it was ‘insulting and degrading’ for the credit card company to suggest her son had visited a ‘gentlemen’s nightclub’.
We looked closely at all the evidence and noticed something that neither Mrs B nor the credit card company had commented on. On the same evening as the disputed transactions – and very close in time to when they had taken place – Mr B’s card had been used to withdraw money from a cash machine. The cash machine withdrawal had taken place just two minutes before the last-but-one card transaction at the nightclub.
We asked Mrs B about this cash withdrawal. She confirmed that it was not one of the transactions under dispute. Indeed, she said it was ‘proof’ that Mr B could not have been in the nightclub. She said it showed he was at a different location – using his card in a cash machine – around the time that someone else was in the club, carrying out transactions with what was ‘probably a cloned copy’ of her son’s card.
We made further enquiries of the credit card company and established that the cash machine in question was located inside the nightclub. We put this to Mrs B. A few days later she told us she had discussed the matter with her son and now wished to withdraw the complaint.
Over the years, Mr D had borrowed heavily from the bank in order to support his business. Eventually, however, after his business failed and he was unable to meet his obligations, the bank ‘called-in’ all the money he owed it.
The previous year, Mr D had taken out a 5-year interest-hedging arrangement with the bank for his business loan. When the bank sent Mr D an itemised statement showing details of what he owed, he saw that it had added a substantial ‘break charge’ relating to that arrangement. He queried this and was told he was ‘liable to pay the charge, to come out of the interest-hedge early’.
Mr D then complained to the bank. He said the charge was ‘unacceptable’ because he had never wanted to take out the interest-hedging arrangement. He said the bank had ‘pressured’ him into agreeing to a transaction that he did not understand and that it had never explained to him.
Unable to reach agreement with the bank, Mr D referred the dispute to us.
complaint not upheld
As well as looking in detail at Mr D’s business-borrowing history, we obtained a number of letters and other documents from the bank, relating to the hedging arrangement. We also listened carefully to the bank’s recordings of its telephone conversations with Mr D.
On the basis of this evidence we concluded that there was no substance to Mr D’s complaint that he had been ‘pressured’ into taking out the interest-rate hedge arrangement. The bank had discussed it with him at some length and had given him clear and accurate information.
The bank had taken proper account of Mr D’s financial circumstances at the time. And it was evident that he was an experienced businessman who understood – and had previously benefited from – a variety of sophisticated forms of borrowing. We did not consider that the bank had done anything wrong in offering Mr D the hedging arrangement or in levying a charge to come out of it.
We told Mr D that we did not see any grounds on which we could uphold his complaint but he was not prepared to accept this. He said he wished to pursue his case through to the final stage of our process – an ombudsman’s final decision – and he would be instructing his solicitor to present his case formally, on his behalf.
We explained that there is never a need – at any stage of our process – for consumers to be represented by a solicitor or other third party. However, Mr D said he was certain it would help his case if it was presented to us in a ‘formal and official’ manner.
A few weeks later, the ombudsman reviewing Mr D’s case received a letter from Mr D’s solicitor. The points covered in the letter were expressed very formally, using legalistic language, but in essence they were the same as the points already raised by Mr D. There was one difference, however. When Mr D first contacted us he had stated the amount of compensation that he thought the bank should pay him. In the letter sent to us on his behalf by the solicitor, this figure had been increased to include the solicitor’s fees.
After considering all the evidence, the ombudsman concluded that we could not uphold Mr D’s complaint. It was difficult to see what value had been added to the case by the involvement of his solicitor.
Mr D told us he was unhappy with the size of the bill presented to him by his solicitor – and he intended to take a complaint about it to the legal ombudsman (a separate organisation).
Mrs V struggled to pay all the household bills after her husband left her – and it wasn’t long before she became really worried about the mortgage repayments. She was normally able to pay at least part of what she owed each month. However, she was concerned that arrears were starting to build up. She therefore wrote to the mortgage company to explain her situation.
She was surprised when she got no reply but she assumed from this that the mortgage company was content to leave matters as they were. For the next few months she simply carried on paying as much as she could manage. She was then shocked to get a letter from the mortgage company, threatening to take legal action against her because of mortgage arrears.
Mrs V was not at all sure what she should do. She didn’t feel there would be any point in contacting the mortgage company, as she had already told it about her circumstances and received no response.
A local solicitor, Mr B, had been advising her about her divorce proceedings. So when she next went to see him about the divorce, she showed him the letter about the mortgage arrears.
Mr B told her he was surprised the mortgage company had failed to respond, when she told it of her changed financial situation. He said he was even more surprised that it had then sent her what he thought was an ‘inappropriate letter’, and he told her she had grounds for complaint.
Mrs V didn’t feel sufficiently confident to write a letter of complaint, so she asked if he would deal with the matter on her behalf. Mr B wrote to the company but never received a reply. He then referred the case to us.
After questioning the mortgage company about this complaint, we concluded that it had failed in its obligation to treat Mrs V fairly and sympathetically. It had also made no effort to deal with her complaint. We therefore upheld the complaint.
We always advise consumers that if they pay a third-party to bring a complaint to us, they should not expect these costs to be refunded, even if they win their case. Unusually, in the particular circumstances of this case, we said that as part of the redress it paid Mrs V, the mortgage company should contribute to her legal costs relating to the complaint.