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Simon Read: The claims companies out for a quick buck

It's been a week dominated by complaints. The Financial Ombudsman Service – the government organisation that rules on people's disputes with banks, insurers, and other financial firms – published its annual report, which made for interesting reading. It came as no surprise that the number of new complaints received by the service topped 130,000. Let's face it, there's been plenty to complain about in the past year.

But the number of cases brought to the Ombudsman by commercial claims management companies soared by 40 per cent. In theory, any companies that help consumers are a good thing. And it's clear people need help as, according to consumer body Which?, financial service companies are not dealing properly with complaints, causing many to abandon their case rather than go to the Ombudsman.

"It's shameful that some firms are dismissing so many justified complaints that are upheld," says Doug Taylor, Which? personal finance campaigns manager. "This could be just the tip of the iceberg, as many people give up at the first hurdle rather than going to the Ombudsman. Companies have a duty to treat their customers fairly and this means giving all complaints due consideration." On that basis, having someone to help fight your corner against a mighty financial firm sounds a good idea. But that's not what the claims handlers do. They charge for doing what any consumer is capable of doing, possibly with the help of Citizens Advice or some internet research. There are also concerns that claims companies simply push through any case, regardless of its merit. The FOS report shows that it turned down one in ten PPI claims. That suggests that someone was wasting the Ombudsman's time, and I'd bet my boots those cases came from claims handlers.

I was called by a firm just this week trying to persuade me I have a claim against my bank for unacceptable overdraft charges. It's years since I've gone over my authorised overdraft so I know I have no such claim, but the firm refused to believe me, such was its desire to make some easy money. I know the banks are to blame for many of our financial woes, but these claims management companies are far worse. They're now encouraging people to exploit a loophole in the credit laws to wriggle out of loan agreements, which I find morally questionable, too.

It's all part of the growing compensation culture which leads me to the second major complaint of the week. That came from Nationwide building society boss Graham Beale who hit out at the Government for "punishing prudence" after its annual profits collapse by 69 per cent to £212m. The biggest hit to profits was actually the £241m the Nationwide was forced to hand over to the Financial Services Compensation Scheme, the government's savings protection scheme which pays out if a firm goes bust.

Beale argues that the Nationwide is paying for the banks' cock-ups. He said "We are basically paying for Bradford & Bingley and Iceland as their costs have crystalised. But the system is punishing prudent players who are picking up the pieces for riskier businesses." You can't help have sympathy for the society, which makes a change!