Income protection & PPI
Claims management companies explained
By Dean Sobers
Article 1 of 2
Claims management companies explained
Find out what a claims management company can do for you - and whether it's really your best option for reclaiming PPI.
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 ‘You could be owed thousands!’, they are designed to make you speculate about the thousands you may have paid for mis-sold insurance. But the fact is you don't need to use a CMC to get any money owed to you. You can just as easily do it yourself, by following advice on the Which? Consumer Rights 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 specialise 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 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 CMCs 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've used a claims management company to get PPI redress, tell us about your experiences at email@example.com.
- Last updated: August 2016
- Updated by: Dean Sobers