People making claims for mis-sold payment protection insurance (PPI) are often advised to avoid using claims management companies and instead do it themselves. But it turns out that most claimants ignore that counsel and let claims firms do all the work for them instead.
New research from consumer publication Which? reveals that over half of consumers making PPI claims use the services of a claims management company, rather than dealing directly with the bank or other financial institution that mis-sold them PPI. Chief among claimants’ concerns is the prospect of dealing with baffling administrative procedures and all the time and effort it might entail.
“Our research found that people are put off by the prospect of complicated and lengthy paperwork, with one in three people who had a relevant financial product thinking it would be very difficult to check if they had been sold PPI,” Which? said.
“We also found that more people thought it would be easier to claim PPI compensation through a claims management company than direct from their bank,” it added. The respected consumer champion said it wants everyone in the UK who has been mis-sold a PPI policy — on anything from loans to mortgages, credit cards and vehicle financing — to be compensated.
PPI claims countdown
August marks the start of a two-year period for making PPI claims before the entire affair is wrapped up. The Financial Conduct Authority (FCA), wanting to put an end to one of the biggest financial scandals to ever occur in the UK, has brought in a deadline for such claims of August 2019.
Not all claims firms are happy with that, however. We Fight Any Claim, based in Wales, has launched a legal challenge, arguing that the deadline benefits the big banks and not consumers. The legal move is the form of a judicial review and the company says it is soon expecting a decision from the High Court on whether it can go ahead.
The FCA maintains, however, that the cut-off period is fair and that two years is sufficient time for people to check if they have been mis-sold PPI and to make a claim. It will be reminding them about all of this in an upcoming advertising campaign — paid for by the banks.
Big bank hits
The latest developments come as the large UK banks and other financial firms responsible for mis-selling PPI to tens of millions of people are buckling under the strain of PPI payouts. Lloyds Banking Group has now totted up its total PPI refunds and compensation costs and it comes to a whopping £18 billion, while Barclay’s is dealing with a £1.4 billion loss last year due to PPI payouts and has put aside a further £700 million to deal with claims.
Credit card firm Capital One is also feeling the strain and was £45.4 million in the red last year because of PPI claims it is having to cover. Lloyds says it is continuing to deal with a flood of PPI claims, amounting to some 9,000 every week. With payouts averaging around £3,000, that’s very big business for those involved in handling these claims. Indeed, a total of £27.1 billion has been paid out since 2011 and claims firms — many using sophisticated claims management software to cut through heavy workloads with ease — have enjoyed a bumper £5 billion in fees to date.
Meanwhile, the authorities and others, including publications, may well be urging people to deal with their own PPI claims and avoid claims firms’ fees. But, as the Which? research makes clear, it’s the expertise of those companies in this area that is winning the day.