Building societies bombarded with bogus PPI claims
False claims for payment protection insurance (PPI) compensation to building societies shot up by 247% in the six months to the end of April, according to data from the Building Societies Association (BSA).
These companies are accused of misleading people into thinking they will receive compensation for the mis-sold insurance, and encouraging customers to lodge claims even if there is no proof a policy was mis-sold.
Earlier this year the Ministry of Justice (MoJ) gave a warning to CMCs to make sure basic checks were made before a claim was lodged, but the BSA says this has made no difference and in some cases CMCs have stepped up their bombardment of lenders.
CMCs have also been accused of using aggressive selling tactics and targeting the elderly and vulnerable by door-stop selling. Some demand an up-front fee, even when there is no likelihood of success, fail to disclose their fees or use misleading phrases such as 'no win no fee' and then still charge the customer when the case isn't successful.
The BSA is calling for tighter restrictions on CMCs and says to combat the problem these companies should have to pay a fee for each claim they put forward if it proves to be false.
It also says the MoJ should be given greater powers to regulate CMCs including the ability to strike off offending companies as a last resort.
What is PPI?
PPI is a type of product taken out with credit cards, mortgages and loans to cover repayments should you fall ill or lose your job.
But thousands of ineligible policies were mis-sold and around £4 billion has been paid out so far since the beginning of 2011, according to the Financial Services Authority (FSA).
What are claims management companies?
CMCs promise to do the hard work and get compensation back for customers. They have sprung up rapidly in the past year, but they often put forward customer claims even when PPI has not been mis-sold.
They also take a hefty chunk of around 25% out of any compensation received and are therefore a complete rip-off.
How can I claim PPI compensation?
Claiming PPI is easy and there is no need to go through a CMC. In the first instance go straight to your PPI provider directly and provide as much information as possible such as, when you took out the policy, how you paid for the policy and whether you've ever attempted to make a claim.
The Financial Ombudsman Service (FOS) will then determine whether you have a case, and look at the amount of compensation available. For more information read our guide on how to get your money back.