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PPI claims management firms take 25% of pay outs


Claims management firms that specialise in payment protection insurance (PPI) claims took almost a quarter of consumer’s compensation, between April 2011 and November 2015.

During this time period, banks and financial organisations have paid out around £22.2bn in compensation to 12 million customers who were mis-sold PPI.

However, the National Audit Office (NAO) has said that between £3.8bn and £5bn of this has been taken by companies that handle these claims on behalf of consumers.

Despite it being free to make a complaint about mis-selling to the Financial Ombudsman Service (FOS), around four fifths of PPI complaints are made through a claims management company. This means that the majority of mis-selling victims are losing out on a significant portion their compensation.

The NAO claimed that the reason that many consumers make a complaint via a claims management company was because they felt it would be too stressful, or they wouldn’t achieve anything by doing this.

Major problems still exist

Further concerns were also raised by the NAO, who claimed that mis-selling still remains a ‘major problem’, and that the Financial Conduct Authority (FCA) needs to do more.

They said that even though the fines represented a major incentive to avoid mis-selling, there was no clear reduction in the practice.

Amyas Morse, head of the National Audit Office, said:

"The FCA cannot be confident that its actions are reducing the overall level of mis-selling, and it has further to go to show it is achieving value for money."

Currently, it costs around £834m a year to run the FCA and the FOS. However, the time it takes the FOS to handle a complaint has increased threefold since 2011/12.

This increase in the time to handle a complaint is largely due to a backlog of PPI cases that the FOS does not expect to clear until July 2017.

The FOS received 164,347 new complaints in the second half of 2015, 56% of which were new complaints about PPI. Although this is a 6% fall on the previous six months, Mr Morse said that there was not a noticeable decline in the number of cases that were being upheld by the FOS.

A spokesperson for the FCA said:

"The report makes clear that the recommendations, which we are accepting, are designed to build on the FCA's current strategy and increase confidence that it is achieving its intended outcomes for consumers. Protecting consumers from the effects of mis-selling is central to what we do."

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