If you’ve found yourself watching daytime television recently, the chances are you’ve seen an advert for how you can claim compensation for mis-sold payment protection insurance (alongside Stannah stair lifts and funeral plans).
And yes, if you’ve got a PPI policy you could well be eligible for compensation. In fact, millions of people have been mis-sold the product (designed to cover your earnings should you fall ill, have an accident or lose your job), as it was pushed by unqualified ‘bank advisers’ to many customers who would never have qualified to make a claim. These included retired and unemployed people who had no job to lose, the self-employed, and people with pre-existing illnesses.
Banks made billions in profits from these policies, with high commission charges alongside low claims rates (roughly just 20% ever paid out).
So it’s only fair that banks finally have to cough up for their greediness. But before you go ahead and make a claim, watch out for the vultures that are currently enjoying the compensation feast; the claims management companies.
Often referred to as ambulance chasers, these are the ones that are running all the ads on TV, sending you texts or calling you about your possible PPI compensation claim. And are they doing it out of love for you, the customer?
These firms are making a tidy profit. One called me recently about my potential PPI claim (I haven’t got a policy at all but apparently a lot of bogus PPI claims are being made – and mostly by claims management firms). I asked the sales rep on the phone just how much commission the company would take if my claim was successful. He reluctantly revealed that it was in fact, wait for it, 30%!
Seeing that the average payout for PPI complaints is around £2,750 (according to the Financial Ombudsman Service) that means these firms would make £825 on each successful claim – not bad.
But do they have to put a lot of effort in? Not by the sounds of it. I had a meeting with the Financial Services Compensation Scheme (that deals with any PPI claims from insolvent firms) the other day, and it told me that any PPI claims made to it by claims management companies often lacked even the basic details, so it would have to chase the customer instead.
So, a big chunk of commission for hardly any work. Not surprising then that around FOUR IN FIVE of all PPI complaints the FOS and the FSCS receive are made by claims management companies, and not individual customers.
But the thing is that there is no need for a consumer to use a third party to make a complaint – each case will follow the same process, regardless of who is bringing the complaint. Additionally, the Ombudsman service is free, and so is the FSCS.
It’s also fairly straightforward to claim compensation for PPI. If you think you have a valid claim, simply contact your lender and ask for a review. Banks have 21 days to appeal the decision. If they do not appeal – or if that appeal is unsuccessful – you can submit your complaint. If that doesn’t work, speak to the Ombudsman that will fight the case on your behalf.
In the words of the Ombudsman: "Why pay someone else to do it for you – when you're just as likely to win by doing it yourself for free?"