The National Audit Office has revealed that the Financial Ombudsman Service handled more mis-selling claims via claims management companies than individual consumers last year.
Mass claims attract CMCs
The Comptroller and Auditor General’s new report identifies three areas where claims management companies (CMCs) have become more prevalent in recent years. These are mortgage endowments, payment protection insurance (PPI) and bank and credit card charges. The percentage of claims received via CMCs has grown from 18% in 2007 to 45% in 2011.
In a speech to the British Banking Association in 2011, chief ombudsman Natalie Ceeney acknowledged claims management companies as ‘a powerful force in the market that can’t be ignored’. She said: ‘They didn’t create PPI mis-selling, but they have exploited the situation aggressively and hugely to their commercial advantage’.
Poor practice exposed
In October 2011, Which? investigated how claims management companies operate and found serious shortcomings, including failing to inform consumers that they could go to the FOS themselves and suggesting that using a CMC gives you a greater chance of success than going direct. We also exposed high fees and unfair contract terms.
Going direct to the FOS
It isn’t necessary to use a claims management company to get compensation for mis-sold PPI. A free online Which? PPI complaining tool guides you through the entire process.
Which? Personal Finance Advocate, Lucy Widenka says: ‘Over 10,000 people have already used this tool to make a complaint. By avoiding high fees they retain all the compensation they are entitled to, rather than paying a large chunk to a middleman. If you do decide to use a CMC, read their terms and conditions carefully, particularly the sections on fees and compensation. Never pay an upfront fee and don’t feel pressured into anything.’