Over half of claims management companies are not up front about fees and chances of a payout
8 November 2012
As MPs debate the need for action on claims management companies today, Citizens Advice is calling for claims management companies to be banned from charging up front fees as firms often fail to deliver on claims, making them worse off than before.
The call comes ahead of the publication of findings from a new report 'The claims pest' out next week (Wednesday 14 November) which exposes the predatory tactics of claims management companies who are set to take £2 billion from the pockets of people who have been miss-sold PPI.
The new figures, taken from a Citizens Advice poll of over 300 people*, show that people are being left in the dark by claims management companies when they first contact a possible client:
- 2 in 3 don't tell people how much they would charge for their services
- 72% don't say when they will charge their fees
- 4 out of 5 do not give information about their cancellation rights
- just 43% say what would happen if you took out a claim
- and less than half were clear about people's chances of success.
Citizens Advice is urging the Ministry of Justice to ban claims management companies from charging up front fees. The average up front fee is £600** yet claimants often have no way of knowing if they have any chance of success. One CAB saw a client who had been charged an extortionate £3,300 in up front fees alone.
Citizens Advice also found that 1 in 4*** people were in debt after forking out costs for the claims management companies' fees and charges.
Yet consumers can keep all of their compensation by making a claim, for free, by going direct to their bank and you can get free advice on how to make a claim from Citizens Advice.
Citizens Advice Chief Executive Gillian Guy said:
"Claims management companies are preying on people who have already lost out thanks to the banks' mis-selling.
"These companies are a hindrance, not a help. We see people who end up worse off because, despite having a successful PPI claim, the compensation goes to pay off their debts and they are saddled with a large fee. Plus many people are paying up front fees yet never get a penny of a payout.
"You can make a claim for mis-sold PPI for free yourself. We have template letters and online advice about how to make a claim and advisers in your local CAB can also help."
Online advice about how to make a claim yourself for PPI can be found at adviceguide.org.uk
*Figures from an online survey of over 300 consumers who had been contacted by claims management companies. The survey was run in August 2012.
**Average calculated from up front fee details supplied by advisers at Citizens Advice Bureaux.
***Figures from an online survey of Citizens Advice Bureaux advisers who were asked to analyse their cases about problems with claims management companies. The survey was run in August 2012.
Notes to editors
- The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
- The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see www.adviceguide.org.uk
- Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.9 million problems from April 2011 to March 2012. For full 2011/2012 service statistics see our quarterly publication Advice trends
- Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable (nfpSynergy’s Brand Attributes survey, May 2010).
- Most Citizens Advice service staff are trained volunteers, working at around 3,500 service outlets across England and Wales.