We want to remind HCLs and CMCs that we expect them to work together to resolve disputes and disagreements in the interest of their customers and we encourage CMCs and HCLs to agree streamlined claims handling processes with each other, where possible.
Examples of some of the issues causing tension between CMCs and HCLs are as follows:
- Some HCLs have identified instances of a CMC having presented a claim, but the HCL insists that the customer had never taken out a loan with them.
- HCLs may suspend lending to clients who bring complaints while the claim is being investigated, potentially denying those customers an important source of credit. Faced with this, some customers may withdraw the complaint, possibly resulting in the CMC charging the customer a cancellation fee.
- Some HCLs have expressed concern that CMCs may be using ‘catch all’ letters of authority (LoAs) to pursue claims against more than one HCL rather than ensuring that a customer agrees a separate LoA for each HCL against which a claim is being made. We expect LoAs to provide sufficient information to HCLs to allow them to confirm the CMC has the customer’s consent to act on their behalf.
- Some CMCs have expressed concerns that HCLs’ checking of LoAs may be excessive and deliberately being used to hinder a customer’s ability to progress their complaint using a CMC.
- Some HCLs appear to be unwilling to share information efficiently – for example by agreeing streamlined claims processes – with CMCs who are exploring potential claims. This has resulted in some CMCs using full Data Subject Access Requests (DSARs) to get this information from HCLs.
Where we have investigated complaints from HCL firms about CMCs, we have found that, in most cases, the customer has legitimate grounds to complain and is being represented by a CMC with a valid LoA. However, we remind CMCs that:
- They must not make or pursue a claim if they have reasonable grounds to suspect the claim does not have a good arguable base or is fraudulent, frivolous or vexatious.
- They should take all reasonable steps to investigate the existence and merits of each element of a potential claim before making or pursuing a claim.
- Their investigations should enable them to make representations when presenting a claim which: substantiate the basis of the claim; relate to the nature of the claim and are specific to the claim; and are not false, misleading or an exaggeration.
All firms are also reminded of the need to have regard to previous FOS decisions when they are dealing with complaints.
All firms should consider the points in this publication to ensure customers’ interests are not compromised, and to ensure they can demonstrate they comply with our rules as set out in the FCA Handbook.
Last October, we sent a letter to the CEOs of CMCs setting out our supervision strategy for CMCs. We also sent a letter to the CEOs of HCLs in 2019 which set out our view of the key risks that those firms posed, and noted that we had seen increasing numbers of complaints against these firms.