The claims management industry was no doubt rubbing its hands with glee when the Financial Services Authority announced that lenders must reimburse those who were mis-sold payment protection insurance.
A number of lenders have now said they will deal with these complaints as efficiently and quickly as possible, but that will not stop some claims firms from cashing in.
Some three-quarters of PPI complaints to the Financial Ombudsman Service now involve claims management companies.
The chief executive of the Financial Ombudsman Service used her speech at the British Bankers’ Association conference today to tell banks that they created the firms and it is their job to eradicate them.
Natalie Ceeney, chief executive of FOS, told delegates: “In the last decade we’ve seen the emergence of claims management companies. In financial services, these companies were born out of mortgage endowment mis-selling.
“The opinions I hear expressed about claims management companies range from the unprintable to the view that they’re a more powerful corrective force than the regulator.”
She told banks that the easiest way for them to wipe out claims firms would be for them to change their attitude and instead of hiding from complaints tackle them head-on.
No doubt there are some consumers who will feel more comfortable paying a claims firm to deal with their case and handle all the work for them, but for every good claims firm another bad one sits alongside it.
And although the Ministry of Justice is responsible for regulating the firms it is not comparable to the kind of regulation that lenders and brokers have to abide by under the FSA.
It looks unlikely that tougher regulation is on the cards as the claims management industry spans not just financial services but other sectors, which would be out of the FSA’s reach.
It ultimately would work to the benefit of banks if they can try and crack down on these firms by improving their complaints procedure. If they fail to be helpful to those complaining they will only throw them into the arms of claims management firms further.