Claims management companies Claims made by CMCs
Watch daytime TV or flick through the classifieds in your local paper and you’ll soon see adverts for claims management companies (CMCs).
With statements like ‘Write off all your debt’ and ‘Reclaim mis-sold PPI’, they are designed to grab your attention. And following the recent High Court ruling on banks and their mis-selling of PPI, which the banks lost and are not appealing against, the chances are that even more adverts will appear promising to get you money back on PPI. Yet the fact remains that you don't have to use a claims management company to get any money owed to you, you can just as easily do it yourself, by following advice on the Which? PPI Campaigns pages.
What are Claims management companies?
'Claims management' may conjure images of solicitors dealing with personal injury claims, but there are a large number of claims firms which specialize in financial services claims - from consumer credit agreements such as credit cards and loans to bank charges and PPI.
Many CMCs also advertise themselves as being able to write off credit agreements, especially credit cards and loans. They claim that they can wipe out debts on credit agreements taken out before April 2007 - but we don't feel that this is a responsible practice - see CMC checklist.
If you’re thinking about using a claims management company (CMC), we suggest that you think again.
When our undercover researchers called 45 of these companies about reclaiming PPI and bank charges, almost a third had serious shortcomings – exaggerating success rates, discouraging customers from pursuing claims themselves or failing to be upfront about charges.
The Financial Ombudsman Service (FOS) has also expressed concern about whether such companies are of any benefit to consumers, particularly because of their high fees.
Since late 2006, these firms have been regulated by the Ministry of Justice, which has also issued warnings about upfront fees and misleading statements - such as 'guaranteed' and '100% success rate' - and a number of companies dealing with financial services have had their licences cancelled or suspended by the MOJ.
How CMCs can work
PPI makes loan or credit card repayments if you’re unable to work or lose your job. But it has often been mis-sold, with consumers believing that PPI was mandatory or not knowing it was included. Some policyholders would never have met their policy’s criteria for a payout.
If PPI has been mis-sold, you can reclaim premiums paid in the last six years, either from the company that sold the policy or, if it doesn’t cooperate, you can take your case to the Financial Ombudsman Service (FOS).
A CMC will try to persuade you to let it process this claim on your behalf, taking commission of upwards of 25% if it’s successful. While this could take some hassle out of claiming yourself, a recent review by the FOS noted that many PPI cases overseen by CMCs lack adequate information, which can delay the process.
Some CMCs also offer to claim back unfair overdraft charges, even though their chances of getting a good result in the short term are slim. Although the bank charges test case is still going through the courts, banks have been told that they’re not yet obliged to process claims for unfair charges. And despite this wait for a result, you can still submit a claim yourself to your bank now.
Since 28 January 2015, complaints about claims management companies have been handled by the Legal Ombudsman, which holds powers to force companies to pay compensation or provide other forms of redress.
Have you used a claims management company?
If you have used a claims management company to get PPI redress, tell us about your experiences at email@example.com.
Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.