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FSCS sees rise in spurious mis-selling claims against brokers

The Financial Services Compensation Scheme says that it is seeing a growing number of spurious mis-selling claims against mortgage brokers.

Announcing its budget and levies for 2019/20, the lifeboat scheme revealed that the funding it is seeking from mortgage advisers and lenders will remain unchanged on the previous financial period at £1m and £4m respectively.

The FSCS does not say whether or not the increase in bogus complaints has been triggered by advertising campaigns from claims management companies.

Its report says: “During 2018/19 we have seen a change in claims made to FSCS with increasing volumes of mis-selling claims being provided with very little substance or evidence to support the claim being made.

“Due to this, these claims have a low uphold rate.”

The report continues: “We are making efforts to stop these claims before they are made and to make clear the evidence we would need to fully investigate the claims. This is factored into our forecast which sees the volumes and uphold rates return to their previous levels.

“These changes have not impacted our levy forecast as we continue to receive consistent numbers of upheld claims.”

The report says claims against Sipp operators are the main reason for a £16m increase to its levy for the coming year.

The lifeboat fund says the £16m is a relatively small increase on its predicted figures in January, however.

In addition to an uplift in claims against Sipp operators, the FSCS says continuing costs for historic insurance failures also pushed up the price.

A total £74.6m in the £532m was attributed to the FSCS management expenses bill, or what it costs to administer the scheme outside of the cost of actual compensation payments.

The new 12-month levy is higher than the 2018/19 levy with costs of £468m, but that only covered a nine-month period between July 2018 and March this year.

Split down as a month-by-month cost, this puts the new levy £42m lower than the last.

Despite this, the lifeboat fund says pension claims resulting from poor advice remain the leading cause of cost increases, as they were in 2018/19.

Ami chief executive Robert Sinclair comments: “The move secured by Ami to get members out of the Pensions and Investments compensation categories will now bear fruit [and] invoices for mortgage and protection advice firms this year will now be significantly lower.

“The only potential issue on the horizon is claims for poor debt consolidation advice provided by Mortgage Matters Partnership. Ami will be talking directly to the FSCS to ensure that they apply reasonable tests to limit the liability of firms on what will be complex cases to decision.”

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