Claims firms make up to £5bn from PPI complaints: but you can reclaim for free
In 2014/15, 80% of complaints made to independent arbitrator the Financial Ombudsman Service were through claims management firms.
The Committee of Public Accounts, which has published the figures in its new report on mis-selling, says that it’s “disappointed” consumers have missed out on what should have been theirs – claims firms typically take between a quarter and a third of any compensation paid.
The Committee adds that public bodies involved in the mis-selling scandal— the Treasury, the Ministry of Justice, the Financial Conduct Authority (FCA) and the Ombudsman—have been too slow in taking responsibility for the situation, and too passive in allowing it to happen.
It wants the Treasury and the Ministry of Justice to report publicly on the effectiveness of their actions in reducing the role of claims management companies in the PPI industry, and for the Treasury and the FCA to demonstrate how they will ensure these problems don’t happen again. It highlights that the pension freedom reforms are a potential trigger for future mass mis-selling.
In addition, the report recommends that the Ombudsman sets out a timetable for reducing PPI complaints – some people wait years for a decision and to get any compensation due.
It also calls for more to be done to improve the culture of financial firms, and to ensure consumers understand what they’re buying and how to claim compensation where necessary.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Claims management companies
Regulated by the Claims Management Services Regulator since 2006, claims management companies offer advice and legal services in respect of claims for compensation, restitution, repayment for loss, damage or negligence. To many, the term is merely a polite euphemism for “no win, no fee” law companies. If you feel they offer services you need, approach with care.