Tough rules are curbing claims management firms
The number of claims management firms has shrunk by 10% over the past year, thanks to the arrival of tighter rules.
Last month, 1,700 companies were active in the industry, down from 2,435 in March 2012.
The Ministry of Justice claims management unit said it warned 285 companies, suspended seven and cancelled its authorisation of 211 during this period. It also dealt with 16,000 consumer complaints.
Some of the new rules introduced included a ban on referral fees between lawyers and claims management firms working on no-win, no-fee deals.
Claims companies were also banned from taking fees from customers before a written contract had been signed.
"We have taken strong action to rein in the rogue firms... and the impact is starting to show," said Justice Minister Helen Grant.
If you think you have been mis-sold PPI, you can lodge a claim for redress yourself. Download the Moneywise template letter here.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.