Claims management companies come with two big catches…
Picture the scene; you get a call, telling you that you may be entitled to a refund for a product you know nothing about and didn’t even know you had – Payment Protection Insurance (PPI).
So what’s the catch? Well, you’ll be charged. But hey, it’s no win no fee, so if they don’t get your money they don’t get anything either. Or, they charge you a small amount, but again, it’s fully refundable if they can’t get it back.
Sounds fair enough. After all, you might not know anything about drains, so when the sink’s flooding you call a plumber. Or if you’re having trouble with ghosts, who you gonna call? Unfortunately the devil’s in the detail, and there are two key points that you have to consider:
1) The companies that claim to help you reclaim PPI aren’t playing by the rules.
2) It’s as easy as it can possibly be for you to claim yourself.
1. The companies aren’t playing by the rules
Our investigation found a huge range of problems with claims management companies. Firstly, there are the fees. Consumers are owed around £7.4bn by the banks, but these companies typically charge around 30% after VAT. So, with the average individual PPI compensation award from the Ombudsman coming to £2,750 we’re talking about the average consumer paying £825.
But there are also problems around what they define as ‘compensation’, and consequently what you get back. You might think they mean money you’ve paid and are being compensated for. Wrong.
Some firms include a reduction in future loan repayments as part of the compensation, so what you would have paid in future, and only a portion of it will be cash you’ll receive.
There were also issues around transparency. Because there’s a free service in the form of the Financial Ombudsman Service (FOS), CMCs have to make you aware of it – but two-thirds of the companies we spoke to didn’t. They’re also not allowed to suggest you’d have a higher chance of success, or get more back, using them instead – again six of the 25 we spoke to did.
What’s more, some of them charge money upfront, locking you in before you consider your options, and others call you up out of the blue offering to process a claim on your behalf. We’ve heard of people who didn’t even have PPI agreeing to let these companies look into their ‘claim’ and then being billed.
2. Unsure if you have a claim? Look into it yourself
Here’s the key – if you’ve been mis-sold PPI and you’re owed that money back, it’s yours, and you shouldn’t have to give up a portion to someone else. You might be uncomfortable dealing with your bank directly, but there’s loads of independent help available, and if you run into trouble there’s FOS – a free independent mediator – who will look into any dispute.
Finally, after years of fighting, the banks have given in and are now required to deal with your complaint according to prescribed guidelines. It’s not an exaggeration to say that – for an issue as complex as this – it could not be easier for you to claim yourself.
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Jo
Quote:
Here’s the key – if you’ve been mis-sold PPI and you’re owed that money back, it’s yours
Actually, *here’s* the key: instead of expecting to have your nose blown and your backside wiped for you by ‘the banks’ why not try a new idea? How about taking personal financial responsibility? How about reading the terms and conditions of a loan agreement BEFORE signing? How about not borrowing more than you can afford to pay back and then whinging because your mortgage has been pulled in? How about that? This whole argument is BUNKUM.
These are ADULTS who can buy a house, get married, have kids, vote, fight for their country in a war, but they can’t be expected to look after their own finances? Utterly ridiculous.
Nick Frankcom
Jo – I fully agree that people should be reading the terms and conditions first, but there are a few other issues at play here.
PPI was mis-sold, which means that the advice being given to consumers by their financial providers was just plain wrong. While it’s fair to say that a thorough analysis of the terms and conditions would have revealed this (although even then, not in all cases) this is based on the premise that you think the person selling you the product is not telling the truth. In a lot of cases people weren’t informed it was being added to their loan, so they didn’t know there was anything to question, and in others they were led to believe that it was not an optional extra. They either took the PPI, or no loan. It was given to people who could never possibly use it, such as those who are self-employed.
We also shouldn’t conflate the issue with over-borrowing, where people took excessive mortgages or credit they couldn’t afford, those are seperate issues.
John E Robertson
Absolutely!! All such advertising in ANY media should be barred, and companies caught cold calling heavily fined. Hitting their pocket it the only way of stopping this, I sometimes wonder if governments reluctance to take action is due to some MPs having a finger in this pie.
karena
hi,we have gone though a company to claim ppi they are called (investor compensation) our claims have not been big approx £1200, £1100 & £144 & we have been charged 30% plus 20% vat so that 50% out of our money,can they charge this much for claiming for us,we are also still waiting to hear from them about other claims,thx
Mike Naylor
Hello Karena,
If you use a claims management company (CMC) to make a PPI complaint on your behalf they will charge a fee for the service. These fees vary, but 25 or 30 per cent is fairly typical. You should check your contract to see how much they should be charging. If you are charged 30 per cent plus VAT this should be a total of 36 per cent not 50 per cent (30 * 1.2 = 36). You could contact Citizens Advice for help – http://www.citizensadvice.org.uk and (08444) 111 444. You can get legal advice from Community Legal Advice – (0845) 345 4 345.
You don’t need to use a CMC to make a complaint on your behalf. See, http://www.which.co.uk/campaigns/personal-finance/the-ppi-campaign/, for information on how you can do it yourself for free. You can also contact the Financial Ombudsman Service on (0800) 023 4567 and http://www.financial-ombudsman.org.uk.
Thanks
Mike
Mike Naylor – Which? Money Helpline Adviser
lol
no hassle to do it yourself.phone or write for the form.i used a company who sent an e mail and still had to fill out exactly the same form ,for which i ended up giving 30%. i feel mugged.
Lurlin Simon
Early last year I logged a complaint for PPI with one company and was told that it was not successful and they will take the case to the Financial Ombudsman. This was around May-June last year. Around April-May this year I received a call from Investor Compensation about PPI. I explain my situation and was told that they can still help. I filled in the form and returned it. In August I received a FOS form from the previous company to fill-in. Today Investor Compensation calls me, I told them what was going on with my previous claim. They then told me that they are going to bill me for the work they have done. Since sending off the form. I have not heard anything from them until today.
Jeangoo
I had a call from Crystal legal offering me help of reclaiming my mis-sold PPI and said I was owed at least £13k plus interest, their fee for this would be 30%, and said not to accept any offers made by my bank, unless through themselves. However, they seem to have accepted the same offers made by the bank?
I have received the various offers of refund for 5 of my 8 loans from my bank totalling approx £8k but they now require further information regarding the other 3 loans (even though they gave the PPI company the details of these loans)? The PPI company have requested their fee of 30% plus vat hence 36% for their fees which they had not initially mentioned.
However, the PPI company do not seem too bothered about the other 3 loans (they obviously feel they have earned enough fees out of the 5 loans).
lol b
same as jeangoo i had two with the same company but they only pursued the larger one.maybe by now they know which companies are less hassle.on one of my loans i was forced to take ppi in case i felt like getting a divorce – ridiculous still married. As i originally said dont be afraid go to the companys website and request the ppi complaint docs . keep all copies and send important recorded delivery,dont worry if initial approach is refused-send docs to financial ombudsman. can take up to 2-4 months for decision-just mark up your calendar.
g douglas
Hi. I got a ppi claim April last year bank paid me direct. 6 month later ppi call me to say I should get a cheque any day. I thought this was for another claim. But then they realised it was earlier claim and bank had just told them I went toCAB with my paper work and they underlined bit that said there fee be taken off and balance sent to me. So CAB say that was the contract. But ppi still trying get me to pay them. Even offered 10percent off in yesterday’s letter. Where do I stand ?
Kyla
Hello. I as contacted by Direct claims Advice over a year ago regarding PPI and was sent some documents and returned them and never heard anything from them til this week Nearly a full year later, they said the bank had refused to discuss claim with them because i had not filled in TP authority mandate form and asked me me to sign some documents and TP auth mandates. The bank then wrote to me seperatly and made me an offer, if i accept this offer direct will i still be liable for pay the PPI company their 25% even tho they have no written authority mandate allowing them to deal with my case with RBS, Any advice would be appreciated. I have not signed or returned anything to them at this moment