Over half of claims management companies are not up front about fees and chances of a payout
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, 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.
- 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.
- To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
- 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
- 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
- Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.