CMR Bulletin 35
Published 7 September 2018
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CMR business bulletins aim to highlight current developments and provide an update on issues that are of interest or affect claims management services.
This edition includes information and advice on the unsolicited seeking out of personal injury (PI) claimants during customer service calls; considerations before referring cases to the Financial Ombudsman Service; a new Financial Ombudsman Service consumer complaint form; and handling of short-term lending (high cost short term credit or payday loan) complaints.
1. Compliance Update
1.1 GDPR & supplying information to the regulator
Some Claims Management Companies (CMCs) have expressed concerns that providing information to us, including the supply of records containing personal data, would put them in breach of the General Data Protection Regulations (“GDPR) and Data Protection Act 2018 (“DPA 2018”). Having discussed this with the Information Commissioners Office (ICO), we assure you that providing this type of information to us would not put you in breach of these provisions. This is because there remains a legal obligation on CMCs to provide information to us when requested and the new data protection legislation does not present a barrier to this.
When processing personal data, including the provision of such to us, you must have a lawful basis for doing so. Article 6 of the GDPR provides a number of lawful bases on which data can be processed. The appropriate basis when supplying information to us is “processing is necessary for compliance with a legal obligation to which the controller is subject”.
Regulation 12(5) of The Compensation (Claims Management Services) Regulations 2006 states that compliance with the rules is a condition of your authorisation. General Rule 16b of the Conduct of Authorised Persons Rules requires you to provide “any additional information that the Regulator determines it is reasonable for the business to provide within timescales provided for in the request”.
You should notify your clients that you have a legal obligation to share data with the Regulator and may need to so at some point in the future. However, you are still required to supply information even if you have not done this and can rely on the exemption contained in Schedule 2, Part 1, paragraph 5 (2) of the DPA 2018 until you update your privacy information. The exemption states “the listed GDPR provisions do not apply to personal data where disclosure of the data is required by an enactment, a rule of law or an order of a court or tribunal, to the extent that the application of those provisions would prevent the controller from making the disclosure.”
1.2 First Notification of Loss & Unsolicited Approaches
Some CMCs provide ‘first notification of loss’ services, making customer service calls to the claimant’s passengers to corroborate accident details after notification. Some CMCs also enquire about potential personal injury (PI) claimants during these calls with a view to facilitating access to a solicitor for a fee.
Section 122(5) of the DPA 2018 defines “direct marketing” as: “the communication (by whatever means) of advertising or marketing material which is directed to particular individuals”. This definition covers any messages that include some marketing elements, even if that is not their main purpose. If any element of your call constitutes marketing or seeking out potential claimants, you must comply with the rules and regulations relevant to direct marketing.
Client Specific Rule 8 of the Conduct of Authorised Persons Rules 2018 prohibits businesses from acting in a way that would put a solicitor in breach of the rules governing their conduct. The Solicitors Regulation Authority Code requires solicitors to satisfy themselves that any client introduced to them has not been acquired by way of an unsolicited approach by telephone or in person (see Bulletin 26 and CMR Marketing and Advertising Guidance for further details).
The seeking out of PI claimants during a ‘customer service’ call would constitute an unsolicited approach, unless the client has provided consent to receive such marketing. In addition, should you contact someone who is registered with the Telephone Preference Service without their consent you will also be in breach of Regulation 21 of The Privacy and Electronic Communication (EC Directive) Regulations 2003. You must therefore ensure that you obtain sufficient consent from the client or third party in order to make marketing calls to them, even if the primary purpose of the call is customer service based. Such consent must be clearly documented, as required by General Rule 2d of the Conduct of Authorised Persons Rules 2018.
1.3 Considerations before referring complaints to the Financial Ombudsman Service
We are receiving reports and evidence that suggest that some CMCs are routinely or automatically referring complaints rejected by the financial business to the Financial Ombudsman Service without first considering the reasons for the rejection. Additionally, it appears that some CMCs are not advising clients of the prospects of the complaint being upheld by the Financial Ombudsman Service, before seeking instructions from the client about how to proceed. Data provided in relation to some CMCs shows an increasing proportion of complaints, principally about Payment Protection Insurance (PPI), having the initial outcome of the financial business upheld by the Financial Ombudsman Service.
You are reminded of your responsibility to carefully consider the reasons for a complaint being rejected by the financial business and seeking your clients’ instructions on next steps. During your review of the outcome reached by the financial business, you should draw on your experience and consider previous decisions made by the Financial Ombudsman Service when advising and seeking instructions from clients. You should not be adopting policies to refer cases to the Financial Ombudsman Service without consideration of these factors and/or without obtaining instructions from your client.
These are long established expectations and requirements that the Financial Ombudsman Service made clear in its open letter to CMCs in September 2013. The Conduct of Authorised Persons Rules specified this requirement in 2014 when the Rules were updated (now the Conduct of Authorised Persons Rules 2018). We also published accompanying guidance clarifying the requirements of General Rule 2c.
We are closely monitoring trends and practices in this area and will consider taking enforcement action where CMCs are failing to consider the detail of initial outcomes reached by the financial business and previously published Ombudsman decisions before escalating complaints to the Financial Ombudsman Service.
1.4 Changes to the Financial Ombudsman Service consumer complaint form
From 25 May 2018, most processing of personal data by organisations should comply with the General Data Protection Regulations (GDPR). These changes have prompted the Financial Ombudsman Service to update its consumer complaint form. The declaration the Financial Ombudsman Service asks all consumers to sign has been updated to comply with GDPR, and changes have been made to the format and the questions asked to ensure a smooth consumer journey. The updated form is now available on the Financial Ombudsman Service’s website, and you should use it when referring claims to the service.
To mitigate any disruption this change may have on your business, the Financial Ombudsman Service will not accept the old complaint form after Friday 31 August 2018. After this date you must ensure that all claims referred to the Financial Ombudsman Service include the latest version of the complaint form to enable them to investigate the claim.
1.5 Short term lending (high cost short term credit or payday loan) complaints
The Financial Ombudsman Service has seen an increase in the number of complaints from CMCs about short term lending, and expects this to continue in line with its publication of their plans for the year ahead and consultation feedback 2017/2018.
To ensure CMCs are representing a client’s short term lending complaint effectively, CMCs need to understand their client’s circumstances at the time of borrowing, before referring the complaint to the financial business. Failing to conduct a thorough assessment of a client’s financial situation during the period of lending being complained about may mean CMCs are unable to represent their clients effectively.
CMCs will need to make sure when submitting a complaint to the business that they provide it with all the information they’ve relied on in their investigation. The business may ask for further information to conduct its own assessment. It may help resolve complaints more quickly if CMCs are able to provide this at the point of submitting a complaint.
If a client isn’t happy with the business’ final response, the CMC can refer the complaint to the Financial Ombudsman Service. CMCs will need to provide all the information they’ve relied on – in particular, information that will allow the Financial Ombudsman Service to accurately assess a client’s financial situation at the time they applied for their loan(s). CMCs are also expected to follow the recommended approach set out in the Financial Ombudsman Service’s open letter published on its website (the letter relates to PPI but is also applicable to short term lending complaints).
2 Other CMR news and updates
2.1 CMR 2017/18 Annual Report
The 2017/18 CMR Annual Report was published on 5th July 2018
2.2 General regulatory information for CMCs from FCA
The Financial Conduct Authority (FCA) have published general information on the future of regulation for CMCs
2.3 FCA fees consultation
The FCA have recently published their consultation paper Claims Management Companies: recovering the costs of regulation and the Financial Ombudsman Service
2.4 Secondary legislation defining claims management services
HM Treasury published their response to the consultation on secondary regulations and transitional provisions for claims management services
2.5 Recent enforcement action
Read our latest report summarising the action taken against CMCs in breach of the rules between April and June 2018.
2.6 Legal Ombudsman courses
The Legal Ombudsman has two upcoming courses available for CMCs to help improve their complaints handling. These will be delivered on the same day, and CMCs are encouraged to attend both if they can.
Date: 26 September 2018 Location: Manchester University of Law, 2 New York Street, Manchester, M1 4HJ
AM - Human factors: how to avoid service failings (9:30-12:30)
This course aims to help claims management companies improve their procedure is to prevent service failings from occurring, which should in turn reduce the number of service complaints received. It focuses on understanding what human factors are, why things often don’t work in large systems, and how cognitive biases affect us all.
PM - Communication in dispute settings (13:30-16:30)
This course has been developed to help the claims management profession to find out about how parties in conflict communicate, and how effective communication is key to successfully resolving customer service complaints. It also aims to explore best practice in internal complaints handling procedures.
Please refer to the Legal Ombudsman website for more information and details on how to register your interest in attending.