• FOS Publishes Letters on Disputes Regarding the Sale of PPI
  • February 6, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • On 27 January 2012, the Financial Ombudsman Service (FOS) published two separate letters, addressed to financial services practitioners and claims-management companies. Both letters consider cases where a dispute arises as to whether or not a Payment Protection Insurance (PPI) policy was sold to a consumer. The letters explain that these disputes tend to arise when a consumer says that they are concerned that they may have been mis-sold a PPI policy in connection with a credit agreement, but cannot recall the precise details of the transaction.

    The letters suggest that it is in everyone’s interest to ensure that unnecessary enquiries and disputes are minimised. To this end, the FOS expects both the financial business involved and the consumer (and any representative) to be open and cooperative in helping each other uncover the facts of the situation whenever there is genuine uncertainty as to whether a PPI policy has been sold.

    The FOS recently hosted an event for representatives of financial businesses and claims-management companies, at which they jointly identified practical steps designed to improve the position for consumers and to avoid unnecessary complaints and delays. The letters build upon the outcomes of the event and set out the observations of the FOS on the steps it would be reasonable to expect parties to take.

    Financial businesses

    Financial businesses cannot expect a consumer to recall all the details of a transaction (or necessarily to have retained paperwork from that time). However, evidence available to the FOS suggests that in some cases financial businesses have not exercised reasonable diligence in responding to enquires about whether or not a PPI policy was sold. The letters explain that, before a complaint is referred to the FOS, it expects to see evidence that the financial business has taken the following steps:

    • Carried out a reasonable search of its systems (including archive systems) to trace the consumer and to identify whether there is (or was) a PPI policy.
    • Reviewed all available information about the consumer, including any details that may have changed since the time of sale.
    • Taken account of the fact that consumers may not know the exact date that a policy was taken out.
    • Asked for further information (if needed) to help trace the consumer.
    • Clearly set out in its final response the level of investigation that has been carried out.

    Where the FOS considers that the business has acted reasonably in taking the above steps, it confirms that it is unlikely to charge a case fee.

    Claims-management companies

    The FOS has also suggested a number of steps that claims-management companies can take to help financial businesses respond to queries openly and effectively. In the view of the FOS, a simple general statement that a consumer was, or may be, a client of a lender (without at least some supporting information) does not represent appropriate claims-management activity, nor a matter that would warrant investigation. Therefore, before a complaint is referred to the FOS, it expects to see evidence that the claims-management company has taken the following steps:

    • Obtained relevant paperwork from the consumer where this is available (and carried out a preliminary check of credit card statements or loan documentation, to attempt to establish whether a PPI policy exists).
    • Provided enough information to enable the business to carry out a search of its systems.
    • Completed the PPI consumer questionnaire as fully as possible and sent it to the financial business to help it assess the complaint.
    • Provided any additional information reasonably requested by the financial business.
    • Considered carefully the explanation and evidence given by the financial business.

    To help the parties involved, the FOS has also produced a number of case studies. These cover a range of situations where parties have been in dispute about whether a consumer had a PPI policy or not and include examples of how the actions of claims-management companies and businesses alike can affect the efficient handling of a complaint.