PPI claims firms cost a fortune
New figures from the Financial Services Compensation Scheme (FSCS) reveal that the vast majority of consumers making claims for mis-sold Payment Protection Insurance (PPI) from failed firms have done so through claims management companies.
The figures, which are based on an analysis of PPI claims between 2008 and 2011, show more than three quarters using these companies.
The FSCS, which is free to consumers, has helped more than 4.5 million people and paid out more than £26 billion since 2001, with just over £77.5 million of that total for PPI claims.
When people claim compensation through one of claims management companies, they take a cut of money - sometimes up to 25%. With the average pay-out to those going via a claims management company being £4,534, a quarter of this is more than £1,133.
Paying a third party to submit a claim to the FSCS does not significantly increase the chances of receiving compensation either. The figures show the number of successful claims made by individuals is almost the same as for those made by third parties. The uphold rate for claims made through third parties is just under 87 percent, compared with just over 83 percent for individuals.
"Claims management companies take a sizeable part of the possible pay-out and are no more likely to make a successful claim than consumers can on their own. Each application is judged on its individual merits. Whether it is submitted by a claims management company or by an individual has no bearing on the likelihood of success.
"If people make the claim directly and it is successful, they receive the full payment, without having to share a big cut with a third party."