Claims management companies have pocketed up to five billion pounds of UK consumers’ compensation for mis-sold Payment Protection Insurance – according to new analysis from the Citizens Advice service.
Citizens Advice Scotland and Citizens Advice (England & Wales) are publishing new research Wednesday 5th March showing how banks’ slow reaction to the mis-selling of PPI created a chance for claims firms to swoop in and take an estimated £5 billion of consumers’ compensation.
The new evidences highlights how some consumers are experiencing a range of poor practices by claims management companies including a lack of transparency around fees and problems cancelling agreements.
The new research finds that:
- 28% of British adults aged 18+ who have used a claims management company said that the firm put a lot of pressure on them to pursue the claim.
- 27% said the fee structure was not clearly explained.
- 39% of people who used a claims firm were not aware they could make a claim without a claims management company.
- Almost half (47%) of people who had used a claims firm said if they had known about free materials to help them make a claim they would have decided not to use a claims management company.
The CAB service wants claims firms and other financial services to be banned from cold calling in order to halt the tide of nuisance calls and protect people from dodgy businesses.
The service also highlights how low levels of trust in banks also contributed to the boom in claims firms. It concluded some consumers are put off making a direct claim about PPI because banks were the ones who mis-sold to them in the first place.
Citizens Advice Scotland’s Chief Executive Margaret Lynch says,
“This research lifts the lid on PPI compensation companies’ false promises – and shows they are too good to be true.
“Citizens Advice Scotland has seen cases where consumers actually end up out of pocket after being charged more in fees by claims companies than they gained in compensation.
“In fact, anyone can claim a refund themselves without having to pay commission to anyone.
“We would urge anyone who thinks they are affected by this to check out Citizens Advice Scotland’s free online guidance, or call our consumer helpline so you can decide what’s best for you before jumping into a potentially costly contract. That number is 03454 04 05 06, and the website is (link no longer available). Or of course you can call in at your local CAB.”
Notes to editors - click to expand/collapse
Citizens Advice Scotland makes the following recommendations for the claims management industry:
- Cold calling should be banned.
- Make sure the use of up-front fees is a thing of the past and firms do not start to use them again.
- BIS should establish a prominent single point of contact for complaints about nuisance calls – instead of being split between ICO and Ofcom.
- Contracts for claims management work should specify that the loan the firm is making a claim for so it’s clear when firms deserve a share of the compensation. This should be included in the rules for claims management companies.
- 1,050 claims management firms across the UK offer PPI claims services (as of September 2013).
- 79% of complaints made to the claims management regulator are about PPI .
- The Financial Ombudsman Service has received more complaints about PPI than any other financial product.
- In 2011/12 almost half of complaints made to the FOS were made by CMCs – check if about PPI.
- Banks have put aside £22 billion to cover PPI compensation.