National Audit Office says firms have pocketed almost a quarter of winning PPI claims.
Claims management firms are making billions from the payment protection insurance (PPI) scandal, according to new data from the National Audit Office.
Between April 2011 and November 2015 financial firms have had to pay out a whopping £22.2 billion in compensation to 12 million people customers who had been mis-sold PPI.
But 80% of those PPI complaints were handled by claims management companies. These firms don’t charge an upfront fee; instead they take a chunk of your compensation. As a result, these firms pocketed between £3.8 billion and £5 billion of the compensation paid out.
That's money that could have been yours!
FOS struggling to cope
Effective advertising campaigns by claims management firms and ample press coverage of the PPI scandal has meant a huge number of complaints. As a result, the Financial Ombudsman Service (FOS), which handles complaints, is now swamped.
[SPOTLIGHT]It has endured an “unprecedented increase in its workload largely because of PPI cases,” says the National Audit Office’s report. As a result, PPI cases are taking three times as long to process now than in 2011/12. There is also a huge number of complaints that haven’t yet been dealt with. Almost 40,000 cases are still outstanding after two years and the FOS has said it won’t be able to clear the backlog until July 2017.
“Mis-selling of financial products remains a major problem for Britain’s consumers,” says Amyas Morse, head of the National Audit Office. “The regulatory and redress bodies have increased the prominence of mis-selling issues in financial service firms.”
Lloyds Banking Group has had to deal with the largest amount of PPI compensation claims. Today it reported a 7% fall in annual pre-tax profits thanks to increasing provisions for PPI compensation by £4 billion last year. This takes the total the bank has set aside to pay victims to an incredible £16 billion.
You don't need a claims management company!
What's most galling about all this is that you don't need to use a claims management firm if you want to complain about PPI, or anything else for that matter. Taking a complaint to the FOS is very straightforward and doesn't cost you a penny. Complaining through a claims management firm doesn't improve your chances of a payout at all.
If you still haven't claimed for PPI mis-selling compensation, then check out our comprehensive guide on how to do it.
Mis-selling still happening
The National Audit Office has also raised concerns over whether the Financial Conduct Authority (FCA) is managing to reduce the overall scale of financial services mis-selling to customers.
The regulator imposed fines totalling £298 million for mis-selling from April 2013 to October 2015. But it could not provide clear evidence that its actions were reducing overall levels of mis-selling, according to the NAO.
“Gaps in the FCA’s overview of mis-selling create a risk that its interventions may not be well coordinated, and means that the FCA cannot be sure that it has chosen the most cost effective way of intervening,” according to the report.
Given that the FCA has annual operating costs of £523 million the National Audit Office is concerned as to whether it is “achieving value for money,” says Morse.
Battle credit card debt with a 0% balance transfer deal
Don’t miss these:
How to get free life insurance
How to complain to the Financial Ombudsman Service
Financial Ombudsman Service: the banks, insurers and card providers attracting the most complaints