Recently, we posted an overview of the PPI mis-selling scandal, and looked at how the banks are putting millions of pounds aside to compensate customers who were mis-sold these products. Since the FSA and High Court rulings against the banks, there has been a huge surge in the number of companies offering to secure the compensation people are entitled to. By pursuing there claims through these firms, however, consumers could lose as much as £2 billion.
In a press release on Saturday, consumer charity Which? explained that “with an average payout of £2,750 for mis-sold PPI and [claims management companies] taking as standard a 25% cut as their fee, consumers could pay £825 each for something they could easily do themselves.”
Successful claimants could even end up owing money to a claims management company (CMC) – “if the loan is still being repaid, redress often comes in the form of a reduction of the outstanding balance leaving the consumer to pay the CMC’s fee out of their own pocket.”
An investigation carried out by Which? found that only 10 out of the 38 CMCs they contacted offered good advice, and 16 “claimed success rates of 90% or above with little or no evidence.” CMCs are regulated by the Ministry of Justice (MoJ)– since 2007, the MoJ has had to shut down nearly 500 of these companies.
Which? is urging consumers to complain directly to their banks, and has created a free online tool at www.which.co.uk/ppiclaim. Where banks reject a complaint, customers can contact the Financial Ombudsman Service for free, independent help.
Barclays bank is backing the Which? campaign, having expressed a commitment to resolving complaints as promptly as possible.