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PPI compensation companies investigated

New Which? investigation finds rule breaches

Claims managment company investigation

Our investigation into claims management companies found a range of problems

An investigation by Which? into claims management companies (CMCs) offering to reclaim PPI on your behalf finds misleading advice, unfair contract terms and a lack of transparency about fees.

Which? investigation

An undercover Which? investigation of claims management companies found a range of problems, with most not following important rules set out by the regulator, the Ministry of Justice (MOJ). Which? identified problems with every company investigated.

Posing as someone who thought they might have been mis-sold payment protection insurance (PPI), Which? mystery shopped 25 CMCs. Two thirds failed to advise the caller about the Financial Ombudsman Service (FOS), and six repeatedly told the caller they had more chance of success or would receive more compensation using a CMC than by submitting a claim independently.

Richard Lloyd, executive director of Which?, says: ‘Claims management companies must clean up their act. All too often, consumers are being misled about their chances of success and how much they’ll have to pay – the last thing people need if they’ve already fallen victim to the PPI mis-selling scandal. We look forward to the Ministry of Justice taking swift enforcement action where appropriate, based on the findings of our investigation.’


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Rules breaches and unfair contract terms

Which? also found contract terms that were unfair. The typical fee charged by a CMC is 30 per cent of the compensation received (25 per cent plus VAT), but the definition of ‘compensation’ varies. 

Consumers might assume that the fee would be calculated based on the lump sum of money paid to them, but some firms include a reduction in future loan repayments as part of the compensation. As a result, some people could receive far less than they expect, and in some cases even end up owing the CMC money

Three of the firms Which? investigated also charged upfront fees, and in some calls asked for payment over the phone. In a separate survey, half of people who have used a CMC told Which? they were cold called. 

Which? and MoneysavingExpert join forces

Martin Lewis, creator of MoneySavingExpert.com, says: “Even if the claims handling companies all played it by the book, with mis-sold Payment Protection Insurance payouts of £3,000 to £5,000 now being commonplace, the price charged is far too high. Reclaiming is easy for many, just a case of making a call or writing a letter. Yet claims handlers often charge over 30 per cent, which for many means losing over £1,000 of their payout and for most, it’s just not worth using these firms.”

Which? and MoneySavingExpert.com would like to see change in the industry, and together are calling for:

  • A ban on cold-calling
  • A ban on upfront fees
  • All terms, conditions and fees to be published online, making them freely available to consumers without a requirement to share any personal information
  • Fees to be based only on the money paid directly to the consumer
  • CMCs to advise potential consumers upfront of free options to make a claim
  • CMCs never to claim they improve your chances of success or an increased payout, compared to making a claim independently

Which? has handed the results of the investigation and the evidence gathered to the MoJ, which will be taking appropriate action with the CMCs involved.

More on this…

  • Claim back mis-sold PPI yourself using our dedicated online guide, including template letters.
  • Join the discussion on the Which? Conversation blog site to tell us about your experiences.
  • If you have financial worries or are in debt visit our dedicated debt site.
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