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Waves of bogus mis-selling claims is costly deluge

Claims management companies and individual people are bombarding building societies with bogus claims and fishing expeditions to try to unearth evidence of mis-selling of products such as payment protection insurance in the wake of the mis-selling epidemic engulfing the largest banks.

The overwhelming majority of complaints to Hinckley & Rugby Building Society are not even from (or relate to) customers of the Society.

Hinckley & Rugby Building Society chief executive Chris White said:

“Just in the last three months we have had 32 complaints of mis-selling of mortgage payment protection insurance (MPPI) but only one was from a customer who had an MPPI policy with us.

“People are simply trying their luck by complaining either directly or via a claims management company. I think they must simply hope that this shotgun approach will yield something from building societies or banks who might be tempted to pay up without investigating.”

Hinckley & Rugby has not had to pay any compensation to any customers. Only two complaints have gone to the Financial Ombudsman Service and neither were upheld against the Society.

“The problem with these bogus complaints is that our duty is to investigate each one within the Financial Services Authority rules as though it was genuine. That is a burden on the Society in terms of time, cost and staff resource.”

Another drain on the Society’s time and resources is fishing expeditions by claims management companies making subject access requests under data protection legislation. “It costs these companies just £10 for us to supply copies of any paper records we hold about an individual.

“I believe they are doing this in lots of instances just to comb through the paperwork in the vain hope of finding evidence of something that can complained about. Again, it costs the Society time and money to comply with the request, as we are bound to by legislation.”

Chris said both phenomena would be having a significant impact on lenders of all sizes. “We are a top 20 building society, but small compared to some of the major players. If we are seeing this level of bogus complaints then the numbers targeting the largest societies and banks could be enormous.

“It all adds up to a most unwelcome and costly distraction as we and the rest of the building society sector strive to be efficient in order to give savers the best rates we can afford whilst lending money to people to buy homes. This is another example of the awful behaviour of large banks impacting upon local building societies. Hinckley & Rugby has already had to set aside over £1m towards compensation costs for customers of failed banks, including Bradford & Bingley.”

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