Claims handling firms named and shamed after PPI sting

Claims management companies (CMCs) mislead claimants and frequently flout marketing rules, according to a mystery shopping exercise carried out by consumer group Which?

Posing as individuals who believed they had been mis-sold payment protection insurance (PPI), representatives from Which? investigated the practices of 25 CMCs.

Most of the companies did not follow rules set out by the Ministry of Justice, and Which? identified problems with every CMC it contacted.

Two thirds failed to advise the caller about their option to complain via the Financial Ombudsman Service, despite being required to do so.

Among the worst culprits for this, according to Which?, were WeFightAnyClaim, Belmont Thornton, Challenge Your PPI, Fast Track Reclaim, The Claim Guys, Brunel Franklin, Consumer Finance Claims, Canary Claims and Aims Review.

Six CMCs repeatedly told the caller they had more chance of success or would receive more compensation using a CMC than by submitting a claim independently.

For example, WeFightAnyClaim, told the caller "you have over a 90% chance of claiming it through us, or under a 10% chance of doing it by yourself".

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

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. Which? said, as a result, some people could receive far less than they expect, and in some cases even end up owing the CMC money.

Richard Lloyd, executive director of Which?, said: "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."

Martin Lewis, of MoneySavingExpert.com, added: "Even if the claims handling companies all played it by the book, with mis-sold PPI payouts of £3,000 to £5,000 now being commonplace, the price charged is far too high."