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New Conduct Rules for claims firms let down consumers

8 April 2013

New Conduct Rules for claims management companies are ‘extremely disappointing’ and ‘let consumers down’, according to Citizens Advice.

Gillian Guy, Chief Executive at national charity Citizens Advice said:

“Too many people have been ripped off by these predatory firms who use underhand tactics to make money from people who often don’t have a claim to make.  

“The new Conduct Rules are extremely disappointing. The regulator has let consumers down by not banning upfront fees, barring firms from cold calling or making sure fees are in proportion to the compensation gained.

“While it is good that the rules mean contracts will need to be signed in writing it does not go anywhere near tackling the real problems people are facing.

“We’re keen to remind people that you don’t have to use a claims management company to make a claim for mis-sold PPI – you can do it for free by going straight to your bank.”

In 2012 Citizens Advice Bureaux dealt with over 16,500 problems with PPI, a third more than in 2011. Just under 3,300 of these were about claims management companies. Between April and October 2012, the Citizens Advice consumer service handled over 4,800 queries about claims management companies offering PPI compensation services.

Citizens Advice has been calling for tougher regulation for claims management companies including:

  • Barred from cold-calling.

  • Ban on charging up front fees.

  • Charges and fees should only be in proportion to the compensation gained and paid at the time of payout.

  • All contracts to be signed in writing by the consumer.

  • A standard written contract that provides clear consumer information on risks and cooling-off rights.

Fact file

  • 9 out of 10 people were pestered by calls, emails and spam texts from these firms within 12 months (source CAB consumer poll).

  • Claims companies take around 25% of a person’s successful PPI claim in charges.

  • 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 (source: CAB consumer poll).

  • 60% of people who were pestered by a claims firm got a telephone call and a quarter received a spam text (source: CAB consumer poll).

  • 1 in 5 CAB clients were lead to believe they could make a claim for PPI – without ever being sold a policy  (source: CAB adviser survey).

  • There are 5000 authorised claims management firms.

  • There are 40 complaints a month about dodgy claims companies (source: Ministry of Justice, Claims Management Regulator annual report).

Top tips to give cold callers the cold shoulder

  • Ignore spam text messages.

  • Put the phone down on marketing telephone calls.

  • Be careful how you share your personal contact details.

  • Forward spam texts to your mobile provider for them to take action: 7726 for Everything Everywhere or O2, 37726 for 3, 87726 for Vodafone.

  • Report any scams to Action Fraud on 0300 123 2040.

  • Make a claim for mis-sold PPI yourself by contacting you bank directly.

  • Get advice about claims management companies from the Citizens Advice consumer service on 08454 040506 (or Welsh speaking 08454 04 05 05), online at www.adviceguide.org.uk or from your local CAB.

  • Complain to the Information Commissions Office about spam text on 030 3123 1113.

Notes to editors:

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service 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 see the Citizens Advice website.
  2. 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.
  3. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
  4. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
  5. Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014  service statistics see our quarterly publication Advice trends
  6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.