Overall just over one in three cases is upheld, but the industry suspicion is that it is much lower than this for claims chasers who, as one lender suggested to me, seem to be "throwing as much mud on the wall as they can in the hope that some of it sticks". He points out that the digital automation of the process has made claim generation practically cost free.
We have to consider the probability that much of the relentless rise in claims’ traffic is being generated by CMCs, whose weaponised business model is based on pushing large volumes of cases using tactics perfected over time.
CMCs can pursue any and all claims safe in the knowledge that there is no downside thanks to the ‘heads you win, tails they lose’ nature of the claims process.
There is zero financial cost to the claimant and their representative for bringing a case and losing it, in contrast to the banks and other financial product providers who have to pay the Fos a flat fee of £550-£650 per case irrespective of whether the claimant wins or loses.
This cost is particularly onerous to segments of financial services that have very low rates of mis-selling – in the case of credit broking, only 5 per cent of cases brought are upheld.
It is not difficult to appreciate that there may well even be a perverse incentive to make spurious claims when there is the chance of a pre-arbitration settlement. Banks have shown that they are only too willing to settle to keep their Fos caseload manageable when they suspect that they do not have a case to answer.
Thankfully, and at long last, the Fos seems to be aware that this issue impacts adversely the majority of consumers as well as the lender.
The Fos admits that it has seen examples of both good and bad practice from CMCs with "some representatives submitting mass claims without determining whether they have merit, while others failing to respond to requests for evidence, slowing down our investigations".
It notes that claims chasers often take very large slices of any compensation – compensation that claimants could get 100 per cent of if they pursued the claim themselves.
Additionally, it has not escaped its notice that all this cost to financial institutions – remember, as much as £650 per claim – has to be passed on. All borrowers will therefore be paying for the current largesse in the form of hiked fees and interest rates plus reduced availability as lenders become more risk averse in many product areas.
