Claims management firms must clean up their act

Woman on telephoneAP

Misleading advice, unfair contract terms and a lack of transparency about fees are all too common, an undercover investigation of claims management companies (CMCs) by consumer group Which? has found.

These firms bombard people with unsolicited phone calls, emails and text messages to offer their help with claims for things like mis-sold payment protection insurance. They often claim that they have a better chance of success or will obtain a greater payout, even though there is no evidence of that. The firms typically pocket 30% of the compensation (some even charge upfront fees), so you're well advised to make any claims yourself.

Consumer champions Which? and have teamed up to call on CMCs to clean up their act and stop misleading consumers.

Posing as someone who thought they might have been mis-sold payment protection insurance (PPI), Which? mystery shopped 25 CMCs. Most of the companies called didn't follow the rules set out by the Ministry of Justice (MoJ), and the consumer group identified problems with every company investigated.

Two thirds failed to advise the caller about the Financial Ombudsman Service, despite being required to do so. One said 'if the bank rejects your claim, there's nothing you can do'. Six repeatedly told the caller they had more chance of success or would receive more compensation using a CMC than by submitting a claim independently.

WeFightAnyClaim, for example, told the caller 'you have over a 90% chance of claiming it through us, or under a 10% chance of doing it by yourself'. There's no proof that this is true, and CMCs are prohibited from making such claims.

Three of the firms - Aims Review, WeFightAnyClaim and Tucan Claims - charge upfront fees, and some asked callers for payment over the phone. In a separate survey, half of people who have used a CMC they were cold called.

The investigation also found contract terms that were unfair. The typical fee charged by a CMC is 30% of the compensation received (25% plus VAT), but the definition of 'compensation' varies. Consumers might assume that the fee would be calculated based on the lump sum of money paid to them, but some firms include a reduction in future loan repayments as part of the compensation. As a result, some people could receive far less than they expect, and in some cases even end up owing the CMC money.

Richard Lloyd, executive director of Which?, says: "Claims management companies must clean up their act. All too often, consumers are being misled about their chances of success and how much they'll have to pay - the last thing people need if they've already fallen victim to the PPI mis-selling scandal. We look forward to the Ministry of Justice taking swift enforcement action where appropriate, based on the findings of our investigation."

The group has handed the results of its investigation to the MoJ.

Martin Lewis, creator of, says: "Even if the claims handling companies all played it by the book, with mis-sold Payment Protection Insurance payouts of £3,000 to £5,000 now being commonplace, the price charged is far too high. Reclaiming is easy for many, just a case of making a call or writing a letter. Yet claims handlers often charge over 30 per cent, which for many means losing over £1,000 of their payout and for most, it's just not worth using these firms."

If you think you were mis-sold PPI, visit or to claim it back for free.

Which? and are calling for:

• A ban on cold calling and upfront fees
• All terms, conditions and fees to be published online, making them freely available to consumers without a requirement to share any personal information
• Fees to be based only on the money paid directly to the consumer
• CMCs to advise potential customers upfront of free options to make a claim
• CMCs never to claim they improve your chances of success or an increased payout compared to making a claim independently
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