Claims firm tactics are taking Kafkaesque turn

I recently received a letter from a company called We Fight Any Claim. The letter had the usual shotgun approach used by claims firms.

It asked if I could return the client file in the prepaid envelope provided. According to the firm, this was for payment protection insurance for a mortgage which started on 01/01/1999.

My suspicions were obviously immediately aroused – was this some highly keen solicitor who had been working on the New Year’s Day bank holiday?

There was no letter of authority from the client, who I know rather well and who had, in fact, had Christmas dinner with me last year – my mother-in-law.

The letter of authority arrived dated after the date on the original letter sent to me, still with no prepaid envelope.

The claims management company emailed me the entire file it had received from Abbey, which included telephone transcripts between my mother-in-law and Abbey. I’m not sure the lender should be sending such information.

The letter explained that because the claims firm had paid Abbey £10, I had to send copies of my files. I tried to explain that I didn’t work for Abbey and that it needed to pay me for the time and cost involved.

I have also tried to explain that the client did not take out PPI due to her occupation – she is a district nurse and is aged 63.

But the firm thinks it has hit on a winner and I suppose when I send a copy of the file and there is no PPI, it will think I am withholding information.
My question now is – how do you prove someone didn’t take out PPI?

Name and address supplied

 

Mis-selling claims are a symptom of rotten suing culture

On Mortgage Strategy Online last week it was revealed that over 5,600 complaints about mis-sold payment protection insurance were referred to the Financial Ombudsman Service last year where no policy had ever been sold.

FOS figures show that out of the 222,333 complaints resolved last year, 5,667 cases, or 2.5%, were classed as frivolous compared with 0.9% the previous year.

People in the UK seem to have developed a habit of expecting someone to pay them something, irrespective of the merits of the claim in question.

To make matters worse, we hear that police forces and insurers are selling accident data to claims management firms for a fee.

Justice minister Jonathan Djanogly recently said ministers would look at several practices – including referral fees, touting for business by text message and garages selling lists of drivers involved in accidents. He felt these were the symptoms of a rotten suing culture rather than the cause.

Derek Bradley
Chief executive officer
PanaceaIFA

 

Over-reacting FSA is behind the rise in frivolous PPI claims

The figures from FOS last week showing it had received over 5,600 bogus claims are absolutely disgraceful but the fault can be traced directly back to the Financial Services Authority.

It discredited all PPI policies with its ill-informed pronouncements about a situation that was predictable but that it did not understand.

Ever since it took over control of mortgages and insurance, the regulator has over-reacted to situations it could and should have anticipated if it had been worth its salt.
The costs it has imposed on the industry are astronomical and the impact has been almost exclusively negative.

Dave

 

Lack of action over bogus claims is all too predictable

The FOS figures beg the question – why is this attempted fraud, or obtaining pecuniary advantage by deception, not being reported to the police?

One successful prosecution and some media coverage would probably save FOS and consumers hundreds of thousands of pounds.

Those thinking of trying it on would not be splurging on the compensation not yet received and thereby creating further problems. As for the claims firms – charge them with aiding and abetting or assisting an offender.

Of course this won’t happen as rampant consumerism, which now includes blatant criminality, is king and the regulator doesn’t really care one jot.

It is all rather pathetic and again I doubt they care, trundling along in the defined benefits pension gravy train on their way to other sunnier climes or top accountancy jobs. It’s all quite sad, really.

Name and address supplied

 

Demographics, not deleveraging, are behind low growth

I read with interest Gary Styles’ article in a recent issue of Mortgage Strategy looking at how the future economy will impact on the mortgage market.

He says that if banks and consumers accelerate the rate of deleveraging and gross domestic product growth remains well below 2% for the whole 2012 to 2015 forecasting period, gross mortgage lending will ease back to around £130bn and the housing market will flatline for the foreseeable future.

High levels of arrears are likely to persists in this scenario and repossessions are expected to return to above 40,000 a year.

But I would argue that deleveraging is essential and the real long-term story is the outcome of our demographic profile. Even China’s growth will be affected by its ageing population.

There will be more pensioners year-on-year until 2030, and our state pension is likely to rise yet again, but many people will have health issues and will be unable to work to that age. No politician can resolve this problem.

We may need to become more self-sufficient and rely less on imports – we are probably at the start of the biggest change in the fortunes of the west since the industrial revolution.

We need to rediscover a work ethic as a nation, and borrowers and lenders need to do so responsibly. The pressure on housing may continue, but affordability may restrain the inflationary pressure.

Name and address supplied

 

Use of bridging to finance property is recipe for disaster

I was interested to read the story on Mortgage Strategy Online about the value of the bridging industry having broken through the £1bn barrier for the first time and being on target to reach £1.5bn by the end of 2012.

West One Loan’s quarterly bridging index found gross lending in the 12 months to March 2012 rose to £1.1bn – 21% higher than in the 12 months to January 2012.

The only way you can explain this huge increase in bridging finance is that properties being purchased to hold are being funded with short-term and expensive loans.

This is a recipe for disaster. The value of the underlying assets is decreasing and with the expected reduction in availability of long-term funds due to the problems in the capital markets, and the banks’ need to bolster their balance sheets, property assets may fall further.

Non-owner-occupied bridging finance can typically cost 1.5% per month and with high in and out fees the actual rate being charged for a 12-month loan could well be in excess of 21%.

With buy-to-let lenders increasingly refusing to provide an exit for bridging loans and banks heavily restricting lending, refinancing, the bridge at the end of the term could be difficult.

I can see large numbers of borrowers in trouble, not to mention the problems created by bridging lenders holding large volumes of property that they are trying to shift into a falling market.

With property investors being typically optimistic by nature and expensive short-term bridging finance readily available, it will all end in tears.

Grey-Haired Broker

 

I was interested to read the story on Mortgage Strategy Online about the value of the bridging industry having broken through the £1bn barrier for the first time and being on target to reach £1.5bn by the end of 2012.

West One Loan’s quarterly bridging index found gross lending in the 12 months to March 2012 rose to £1.1bn – 21% higher than in the 12 months to January 2012.

The only way you can explain this huge increase in bridging finance is that properties being purchased to hold are being funded with short-term and expensive loans.

This is a recipe for disaster. The value of the underlying assets is decreasing and with the expected reduction in availability of long-term funds due to the problems in the capital markets, and the banks’ need to bolster their balance sheets, property assets may fall further.

Non-owner-occupied bridging finance can typically cost 1.5% per month and with high in and out fees the actual rate being charged for a 12-month loan could well be in excess of 21%.

With buy-to-let lenders increasingly refusing to provide an exit for bridging loans and banks heavily restricting lending, refinancing, the bridge at the end of the term could be difficult.

I can see large numbers of borrowers in trouble, not to mention the problems created by bridging lenders holding large volumes of property that they are trying to shift into a falling market.

With property investors being typically optimistic by nature and expensive short-term bridging finance readily available, it will all end in tears.

Grey-Haired Broker

 

Banks must not shut out clients on debt management plans

Industry PR John Wriglesworth made the comment at last week’s Manchester Expo that the sub-prime market and 100% LTV loans must come back for the housing market to recover.

I couldn’t agree more. Sub-prime has to come back if we are going to avoid another catastrophe and timebomb.

I have a number of clients who have taken advice from debt management companies or charities, and who have consequently managed to stabilise their financial situation by going on to debt management plans.

They now have defaults and the odd County Court Judgment, but they are repaying their debts – albeit via a debt plan or agreement with their creditors – and most of the adverse has been minor or they have prevented anything more serious.

Having said that, the fact that they are on a debt management plan and have managed to stabilise themselves is irrelevant in today’s markets because most lenders won’t look at them now.

To me this is a short-sighted view by the banks.

Firstly, these clients have sought debt advice and taken responsibility for their debts. They are actively being managed by the debt management companies to repay their debts.

Secondly, most of these lenders have also lent to these clients on an unsecured basis.

Surely offering these clients a remortgage – for example, onto a three- to five-year fixed rate – would create a stable environment for them to continue to pay back all their debts.

A fixed rate mortgage equals stable mortgage payments for such clients. A debt management plan equals stable repayments to all their unsecured debts, and this can only be a win-win situation for the lenders and clients.

Restrict LTVs accordingly and don’t lend to high-risk individuals, but help the majority. Once rates start to increase again, and if these clients are not in a stable mortgage environment by then, it will be a lose-lose situation for banks and clients.

Prevention using common sense is by far a better option than the real consequences of ignoring the problem.

Justin Fordham