Claims firms deterring people from FOS
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Some claims management companies are discouraging consumers from claiming back excessive bank charges or mis-sold payment protection insurance by themselves, reveals an undercover investigation by Which?.
In August 2009, Which? made 68 calls to claims management companies posing as potential customers, 38 of the calls were about PPI and 30 were about bank charges.
Researchers who posed as customers interested in making a claim found that almost a third of firms didn’t meet Which? benchmarks.
Only 10 out of 38 firms asked about mis-sold PPI passed the Which? test and12 of those that failed implied the researchers would be better off using their company rather than claiming independently, even though an independent claim costs nothing.
Which? says this breaks rules set by the Ministry of Justice.
A further 16 firms professed to have successfully claimed back money in 90% or more of cases without properly qualifying this, while five companies couldn’t say how they were regulated.
Advice about excessive bank charges claims was better, though some firms discouraged researchers from claiming themselves.
Comments included “You can make the claim yourself but you will have to wait till maybe next year… [we can do it] straight away”.
One company didn’t mention the ongoing bank charges court case.
Claims management companies typically charge a commission of 25%, plus VAT, if a claim is successful and many also charge upfront fees.
Martyn Hocking, editor of Which? magazine says: “Claims management companies have some very crafty ways to encourage you to use them, from exaggerating their success rates to suggesting they’d be more successful at getting your money back than if you did it yourself.
“Not only are the firms breaking rules in some of these cases, but making a claim for mis-sold PPI or bank charges is a simple process, and you can do it yourself for free.”
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Readers' comments (5)
Chris C***** Debt Adviser | 22 Oct 2009 2:45 pm
Most people that I come across haven't a Scooby about what they have to do let alone compose a letter. They are in effect paying for the advice and help we give them where they would otherwise have failed to even get off the starting blocks. Most people in this situation are not as well informed as the mischief makers at Which and other consumer busy body type groups. When will Which magazine give away free copies for life to all citizens of this great country. Remember to Vote Conservative to bring back a free market economy comrades. Our businesses are legitimate and regulated by government departments.
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Paul Violet. Finance Confidential | 22 Oct 2009 3:53 pm
Although I agree that clients should be advised that DIY is not a difficult process, the fact is that they just DON'T do DIY!
Most people simply won't get round to making the claim, so isn't it better to use a company that will charge, than not get ther money at all?
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Tim Moore | 22 Oct 2009 4:46 pm
I would hope we were one of the 10 that passed the test, but a couple of points: The vast majority of people will not claim if they're not told aout their rights, which is where CMC's add a large proportion of their value. There is woeful public knowledge about the issues with PPI. We did a survey and found the vast majority of people WITH LOANS didn't know what PPI was let alone how to make claim. The FSA don't have the funds to inform the millions of PPI victims about their rights. It's not the job of the FOS or the MOJ, so it's left to commercial organisations like CMC's to do it. The banks may hate it and Which? may be sanctimonious about it, but Mr Which? if CMC's stopped telling people about their right to make a complaint do you think more people or less people would be better off?
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Adam Thomsett | 23 Oct 2009 2:28 pm
I would also hope that we are one of the 10 and would suggest that Which publish the list of companies which formed part of this survey. I for one would want to know if we were failing in our service to the public. Turning to the survey, it should be mentioned that there are over 2500 register Claims Management Companies so the survey is relatively limited in it's scope. I would completely concur with Tim's contribution above that we perform a valuable service to the general public who would in normal circumstances have no idea where to start making a claim. In terms of the fees CMC's charge it should be remembered that consumers have for years been using Solicitors to resolve these type of issues and would normally pay through the nose irrespective of the outcome - what is the problem paying a fee to a company only if they achieve a successful result. Surely everyone's a winner save for the intitution who failed their client in the first instance.
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Anonymous | 27 Oct 2009 12:55 pm
in a survey of 6 people who recently walked past our office it was found that 3 didn't know who Which? were and therefore did not trust their surveys. The other 3 did not want to take part in a survey.
In all seriousness, Which? should look to provide a more balanced, and informed review of the market, as their comments need either clarification or a detailed review into the pros and cons of using a CMC
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