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Claims management companiesInvestigation: claim companies exposed
Our investigation
Since May 2007, CMCs have been regulated by the Ministry of Justice (MOJ), which can be contacted online or on 0845 450 6858.
It recently shut down 100 of them as part of a crackdown on firms that were misleading the public.
We used the MOJ rules to check whether firms were acting fairly and reasonably, ensuring that information wasn’t misleading and advising clients of the ombudsman scheme.
In August 2009, we made 68 calls posing as potential customers – 38 about PPI and 30 about bank charges. To pass our benchmark, companies had to:
What we found
PPI
Of the 38 companies we spoke to about PPI claims, only 10 offered good advice overall.
Of the remaining 28, 12 offered particularly poor advice by claiming to our undercover researchers that they’d be better off with them rather than pursuing their claims independently through the FOS.
One said that it would cost £250 – but the FOS service is free. Another said that a solicitor would be required – but this isn’t necessarily the case, and claiming so contravenes MOJ regulations.
Of the overall 28, sixteen of the CMCs claimed to have success rates of more than 90% – with little or no evidence.
Five companies couldn’t say how they were regulated – one claimed to be regulated by the Department of Constitutional Affairs, which no longer exists. Another sent out literature with the MOJ logo, which breaks its rules.
Five CMCs charged upfront fees of between £40 and £100 – but there can be no guarantee of success and the firm could go out of business.
One firm claimed that its 25% fee (if successful) included getting 8% extra in interest, so it really only charged 17%. We say that this was misleading as the 8% should be claimed back anyway.
We also found four examples of researchers being encouraged to get their entire loan written off even though they’d enquired only about its insurance policy. One firm in particular strongly encouraged our undercover researcher to do this after suggesting it was highly likely that their PPI had been mis-sold.
Bank charges
When it came to claiming back bank charges, more than two-thirds of companies called gave good advice.
Almost all immediately mentioned the ongoing court case that is delaying potential payments, and most were honest about how this impacted chances of success.
However, some still made unsubstantiated claims such as: ‘You’ll definitely get your money back.’ And, when our researchers asked whether they could reclaim the bank charges themselves, the responses were worse.
Nine of the 30 firms said that we would be fobbed off or offered less than we were entitled to.
One said that, unlike the company, we would have to wait until next year to claim while the court case continues. Another failed to mention the case and claimed that a bank charge of £30 paid six years ago, would result in a £250
payment back today. This is untrue.
Kevin Rousell, head of claims management for the MOJ, said: ‘We’ll be investigating the companies that Which? has reported to us.
‘Consumers must be given clear information about the options for pursuing a claim, the realistic chances of success and any costs of doing so – win or lose.
‘Recent steps that we’ve taken to suspend or cancel the licences of a number of companies for failure to abide by the rules make clear that, if consumers aren’t treated fairly, there will be severe consequences.’
Which? says
While the MOJ has taken action against some of the worst offending CMCs, our investigation shows that there are still too many firms breaching regulations.
We’re particularly concerned that companies are discouraging consumers from pursuing claims themselves through the ombudsman – so it’s down to you to prove them wrong.
And when it comes to bank charges and PPI avoid paying 25% or more commission by taking action yourself (see below) and claiming what’s rightfully yours.
Our investigation
Since May 2007, CMCs have been regulated by the Ministry of Justice (MOJ), which can be contacted online or on 0845 450 6858.
It recently shut down 100 of them as part of a crackdown on firms that were misleading the public.
We used the MOJ rules to check whether firms were acting fairly and reasonably, ensuring that information wasn’t misleading and advising clients of the ombudsman scheme.
In August 2009, we made 68 calls posing as potential customers – 38 about PPI and 30 about bank charges. To pass our benchmark, companies had to:
- tell our undercover researcher that they could pursue the claim themselves and not suggest that they would have a more favourable outcome if they opted to use the CMC;
- be clear and honest about success rates;
- be clear about how they charged fees;
- be clear about who the company was regulated by.
What we found
PPI
Of the 38 companies we spoke to about PPI claims, only 10 offered good advice overall.
Of the remaining 28, 12 offered particularly poor advice by claiming to our undercover researchers that they’d be better off with them rather than pursuing their claims independently through the FOS.
One said that it would cost £250 – but the FOS service is free. Another said that a solicitor would be required – but this isn’t necessarily the case, and claiming so contravenes MOJ regulations.
Of the overall 28, sixteen of the CMCs claimed to have success rates of more than 90% – with little or no evidence.
Five companies couldn’t say how they were regulated – one claimed to be regulated by the Department of Constitutional Affairs, which no longer exists. Another sent out literature with the MOJ logo, which breaks its rules.
Five CMCs charged upfront fees of between £40 and £100 – but there can be no guarantee of success and the firm could go out of business.
One firm claimed that its 25% fee (if successful) included getting 8% extra in interest, so it really only charged 17%. We say that this was misleading as the 8% should be claimed back anyway.
We also found four examples of researchers being encouraged to get their entire loan written off even though they’d enquired only about its insurance policy. One firm in particular strongly encouraged our undercover researcher to do this after suggesting it was highly likely that their PPI had been mis-sold.
Bank charges
When it came to claiming back bank charges, more than two-thirds of companies called gave good advice.
Almost all immediately mentioned the ongoing court case that is delaying potential payments, and most were honest about how this impacted chances of success.
However, some still made unsubstantiated claims such as: ‘You’ll definitely get your money back.’ And, when our researchers asked whether they could reclaim the bank charges themselves, the responses were worse.
Nine of the 30 firms said that we would be fobbed off or offered less than we were entitled to.
One said that, unlike the company, we would have to wait until next year to claim while the court case continues. Another failed to mention the case and claimed that a bank charge of £30 paid six years ago, would result in a £250
payment back today. This is untrue.
Kevin Rousell, head of claims management for the MOJ, said: ‘We’ll be investigating the companies that Which? has reported to us.
‘Consumers must be given clear information about the options for pursuing a claim, the realistic chances of success and any costs of doing so – win or lose.
‘Recent steps that we’ve taken to suspend or cancel the licences of a number of companies for failure to abide by the rules make clear that, if consumers aren’t treated fairly, there will be severe consequences.’
Which? says
While the MOJ has taken action against some of the worst offending CMCs, our investigation shows that there are still too many firms breaching regulations.
We’re particularly concerned that companies are discouraging consumers from pursuing claims themselves through the ombudsman – so it’s down to you to prove them wrong.
And when it comes to bank charges and PPI avoid paying 25% or more commission by taking action yourself (see below) and claiming what’s rightfully yours.
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