Watchdog issues warning over "ambulance-chasers"

The Financial Ombudsman Service - the UK's main financial services complaints body - this week joined the attack on so-called "ambulance-chasing" claims firms, criticising them for being "strong on marketing, weak on expertise".

In his monthly letter to the financial services industry, Walter Merricks, the chief ombudsman, sent out a tacit warning to consumers over the quality of many of the claims management firms operating in the industry, adding that he welcomed the Government's recent move to regulate them.

Claims handling firms have been particularly prevalent over the past two years, helping thousands of consumers who had been mis-sold endowment mortgages to claim compensation. However, the firms typically take a cut of up to 40 per cent of any compensation paid.

Critics have argued that this defeats the object of mortgage endowment compensation payments, which are calculated so as to put the consumer back in the position they would have been in, had they taken out a repay-ment mortgage.

In some cases, consumers have ended up worse off than they would have been had they held on to their endowment mortgage and not made a complaint.

Mr Merricks said: "Some of the endowment claims companies we deal with know their business and do their best to understand the basis on which complaints are judged. Others seem to be strong on marketing but weak on expertise. Their service to their customers does not appear to demonstrate value for the fees they charge.

"If the companies we encounter in the endowment sector want to demonstrate their commitment to proper standards, there's nothing to stop them joining the [voluntary regulator now]. I hope that is what we will see."

Under the new rules, directors of claims handling companies which do not secure authorisation could face up to two years' imprisonment. The Bill hopes to ensure customers are not misled by aggressive advice and advertising.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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