The power to settle financial complaints.
The power to settle financial complaints.
A firm giving a recommendation to a customer will need to be able to show that it took adequate steps to identify and consider the needs of its customer – and to make a recommendation that was suitable. (Or if it could not make a fully suitable recommendation, at least to point out where its recommendation had some shortcomings.)
In many cases this is straightforward to assess. For example, in the case of Mr A [ombudsman decision opens in PDF format], the firm said it was making a personal recommendation. In the case of Mr and Mrs B [ombudsman decision opens in PDF format], the firm specifically recommended the product as suitable for the customers.
In other cases, it may be clear that no advice or recommendation was given. This might occur, for example, in the context of an internet sale – where the firm simply sets out the policy for consideration by the customer without any recommendation.
But in other cases, the position is not so clear cut. Typically, the consumer reports a discussion in which they recall the product being strongly recommended to them. In contrast, the firm might have documentation that simply talks of drawing the customer’s attention to the option to purchase the PPI policy. Indeed, the firm may say it never gave advice.
In these cases, we will consider the evidence, and work out what seems most likely to have occurred. Selling might of itself involve some general encouragement. But we are likely to consider as a recommendation any actions which would appear to the customer to be endorsements of the product in the customer’s own particular circumstances.
Typically, in most PPI sales, the customer is already engaged in a personal financial discussion with the firm (about the loan) – and the firm has access to relevant information about the customer’s circumstances. In most of the cases we see – where PPI is sold in discussion with the customer (either face to face or over the phone) – the evidence available suggests it will have been on the basis of a recommendation by the firm.
Sales-process documentation, training manuals and sales scripts can all be helpful evidence in assessing this point. Equally, it might be relevant to assess the degree to which the firm (or one of its branches) was successful in making sales of PPI to a significant proportion of its customers in the period. We would also take account of any relevant regulatory findings about past practice.
Obtaining the direct reports of customers and firm representatives can also be valuable. But we need to guard against the possibility that recollections of the transaction may be influenced by subsequent events.
The case of Mrs C [ombudsman decision opens in PDF format] shows how the ombudsman looks at these issues in the context of an individual complaint.