In my youth, when I would hang around wine bars trying to look cool and being totally ignored by the fairer sex, I knew a chap called Smart Pete.
Smart because he always wore Jacket and Tie. Smart Pete moved into car leasing. The business worked like this. It advertised for people in financial hardship with car leases that they could no longer afford to pay. They approached the car owner (Mr Smith) and offered they could relieve them of the problem and take the car of their hands.
The business would legally take possession of the car, for zero payment, sell the car, pocket the cash and ignore the phone calls when the real leaser of the car came back to the unsuspecting Mr Smith.
This may sound like a scam, and indeed it was. But the point is that Smart Pete did nothing wrong. Mr Smith signed to sell the car and all outstanding payments to Smart Pete, but Mr. Smith’s lease did not let him sell on the lease, and Mr Smith never checked that he could sell on the lease, or that Smart Pete had any arrangement to take the lease over.
Mr Smith was still under contract to the original lease company for the outstanding payments, and now had no car. Smart Pete’s paperwork never promised to pay the outstanding payments to the lease company. Smart Pete was hiding behind the signature on a contract that he knew people would never read.
And this is why I tell this story, I am not suggesting that anyone in the financial services industry would do such a thing, but I do believe we have the same mentality to complex documents and signatures.
We constantly have a debate about application forms signed indeed the ABI and FOS recommend that we do. But this whole debate is based on blame. If we have a signed application form or a Tele-interview report then it is easier to blame the applicant for non-disclosure at a later date.
We should be moving away from this whole aspect of diverting blame onto our customers. If we get the process right, then there will be fewer faults, and fewer discontented claims for non-disclosure and hence blame to start with. As the Japanese say; “Fix the problem not the blame”.
At present there is more emphasis on covering our backs and diverting blame than in solving the problem, that consumers don’t understand the process or their responsibilities, they do not know they are responsible for non-disclosure.
We know consumers don’t read the small print on contracts, so why do we pretend that if they have signed it that they must have understood it. We know they haven’t, the FOS and FSA know they haven’t so let stop pretending. In Tele-interviewing saying “Please be honest, if you do not tell us the truth then we are unlikely to pay your claim.” and listening to the consumer's response, to ensure they have understood it, is far more effective than having several long winded legal written paragraphs on the back page that are never read.
The aim is to ensure the applicant has understood the importance of disclosure at the application stage. This is fixing the problem, not the blame. And Smart Pete, well he appeared on Watchdog and another current consumer programme and the business was curtailed. I believe it was a scam, but he would argue that it was not, that it was legal, his documentations stated that Mr Smith must ensure he can assign his lease, and that he had the signatures to prove it. If Mr Smith did not read the contract then that was his look out. Interestingly it was consumer pressure that curtailed his activities, and not the law or regulation. The business folded and Smart Pete left the country to sell time share in Spain.
Andrew Gething is managing director at MorganAsh
The views expressed in this blog are the author's own and not those of the company he represents.IFAonline
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From 6 April 2019