Claims management companies have made up to £5 billion from payment protection insurance (PPI) claims, despite victims being able to reclaim for free themselves.
In 2014/15, 80% of complaints made to independent arbitrator the Financial Ombudsman Service were through claims management firms.
The Committee of Public Accounts, which has published the figures in its new report on mis-selling, says that it’s “disappointed” consumers have missed out on what should have been theirs – claims firms typically take between a quarter and a third of any compensation paid.
The Committee adds that public bodies involved in the mis-selling scandal— the Treasury, the Ministry of Justice, the Financial Conduct Authority (FCA) and the Ombudsman—have been too slow in taking responsibility for the situation, and too passive in allowing it to happen.
It wants the Treasury and the Ministry of Justice to report publicly on the effectiveness of their actions in reducing the role of claims management companies in the PPI industry, and for the Treasury and the FCA to demonstrate how they will ensure these problems don’t happen again. It highlights that the pension freedom reforms are a potential trigger for future mass mis-selling.
In addition, the report recommends that the Ombudsman sets out a timetable for reducing PPI complaints – some people wait years for a decision and to get any compensation due.
It also calls for more to be done to improve the culture of financial firms, and to ensure consumers understand what they’re buying and how to claim compensation where necessary.