PPI claims firms cost a fortune

Owen Humphreys/PA Archive

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.
Although the number of claims submitted directly to the FSCS more than doubled from 2010 to 2011, the number coming from claims management companies far outstrips the number of individual claims in both years by more than three to one.

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.
Overall the total number of PPI claims for failed institutions has increased considerably in the past year, with 60 percent more people claiming compensation in 2011 compared to 2010.
Chief Executive of the FSCS, Mark Neale reiterates that the process of submitting a claim is straightforward and free of charge. He says that some people may prefer claims management companies to submit a claim for them; "in these tough times people may well think they increase their chances of getting their money back but that is not necessarily the case".

"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."
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