Impact of Claims Management Companies’ Activities on Consumers of Financial Services

[Amethyst]

An excellent read some useful statistics.

http://www.bba.org.uk/content/1/c6/0...ugust_2009.pdf

Consumer Detriment
Although there is evidence of consumers benefiting from using CMC services, there is also clear evidence that CMC clients have suffered detrimental consequences. There is also evidence to suggest that CMC clients are not from the most financially sophisticated consumer groups, suggesting a greater vulnerability to financial difficulties. The research shows that such difficulties resulting from using CMCs include:
1.
Loss of fees – where clients have paid up-front fees to companies that have then ‘gone out of business’
2.
Poor credit rating
3.
Lost Payment Protection Insurance (PPI) cover
4.
County Court Judgement (CCJ)


Although the outcomes outlined above do not happen in the majority of cases, the research shows that such risks exist and only 38% of those interviewed actually said they ‘were made aware of the possible risks in advance’. Interestingly, the research also suggests that a significant number of CMC clients would not have pursued their claim had they been made aware of such risks – 33% clearly state that they would NOT have pursued the claim if their PPI cover could have been lost (33% said ‘don’t know), 50% would NOT have pursued a claim if they could have incurred a poor credit rating (20% ‘don’t know’) and 72% would NOT have pursued a claim if they had thought a CCJ was likely (17% don’t know).

Given the potential risks involved, all those consumers using a CMC should be made aware of these risks and this may drive down the number of consumers using CMC services.

[Amethyst]

Re: Impact of Claims Management Companies’ Activities on Consumers of Financial Servi

good case studies - could almost be threads on here 1

Case Study 3
PPI and Bank Charges Company: Total Refund
Background: Chris has recently set himself up as an odd job man following an extended period of sickness. He is in financial hardship. His salary halved two years ago and, then, he was out of work for approximately a year. He has defaulted on an IVA and has had to sell his house which he now rents back from the new owners. He is married with two children. Chris is 50 years old.
Key Issues
1.
Advertising, marketing and promotion: Chris was not actively seeking a CMC at this time. On a cold call he was advised that he could expect a specific sum of money back from his claim and that it would take between 6 – 12 months to resolve. They also informed him that today was the opportunity to do it.
2.
Obtaining business, referrals: Chris was cold called at home. The message was so positive – we will get the money back, you were definitely mis-sold – that he signed up there and then; “This company cold called me and got me in their spell”.
3.
Advice: Chris had recently defaulted on his IVA and was in financial difficulties. The company charged him £49.95 each for two claims, money that he could ill afford at that point. “Going back it was a vulnerable time. [I thought] I’ll just do it, it will cost me £100 and I had that, I couldn’t afford it really but I was trying to speculate to accumulate”. “This [the claim] would pay a quarter of my debt. You believe it’s going to happen”. They did not advise re: the FOS, or that he may not get all of his money back.
4.
Claims handling/investigation/management services: The person took the charges straight away and advised him on what would happen next – delivery of documentation for him to sign, letters of authority. However, they mentioned that if he wanted to speed up the process, he could go to the FOS and use the template letter there. This was the first point that he realised he could have done this himself without the company. After this the company became hard to contact. The call centres would not pass on his calls or call him back. In July, the FOS turned down his claim as his mortgage company were not regulated by the FSA. Total Refund passed his case to a solicitor who called him back straight away. They explained that they would take his case on a no win no fee basis, but did not explain how this would work (i.e. if his £49.95 covered this already). Chris assumed that it did. After reviewing his case, the solicitor said that it wasn’t valid as well. “It was a brick wall every time, no-one wanted to take it on.”
5.
Fees: Chris was advised that he would pay a £49.95 refundable fee for Total Refund to take the case on – if it was unsuccessful he expected to get this money back. However, when his case was turned down by the FSA and the solicitor that Total Refund put him in contact with, he was told that this fee was not refundable.
6.
Emotional impact: “They knocked my confidence. I was in dire-straits”.
7.
Situation now: “I feel that there’s a list that is probably growing of people who are in financial misery, through whatever fault and they prey on that list”.

Case Study 9
UCCA, Bank and Credit Card Charges and PPI
Company: Investor Compensation
Background: Angie is a mother of two young children. Her husband died one year ago. It was during the later stages of her husbands’ illness that she signed up with the CMC and blames herself for “not being in her right mind. I just knew I needed to get as much money together as possible before he went”. Her sister had claimed successfully in the past. “Somebody like me is really vulnerable, I’ve still got a mortgage hanging over my head… I’ve got the two little’uns and the house is in my name. If I can’t pay them, they can easily get an order against the house”
Key Issues
1.
Advertising, marketing and promotion: Angie knew that her sister had paid 25% of the claim that she made. So she was seeking a company that would match or better this. She used Google to search for companies and then filtered based on the percentage charged.
2.
Obtaining business, referrals: Angie only contacted one company as a result of the lower percentage taken from the claims returned. They also told her that 90% of their cases are successful. “He said to me the maximum turnaround is between 3 – 6 months and that at the moment they were turning around thousands and thousands of pounds for their customers”. They also told her that she would get 100% of her money back from which they would take a percentage. She spoke to an adviser there and decided to proceed with bank and credit card charges for the 3 banks/credit card companies that she had the biggest amount of money on. After the first three were sent through to them, she spent some time seeking the information for another 4 credit cards and then sent these onto Investor Compensation. Three and a half months later she received an email from them discussing unenforceable credit agreements and PPI. She contacted them again and signed up for two PPI and one loan.
3.
Advice: Angie was advised on the time limits – up to 6 months. This was extended when it went to court to 18 months. She was not advised about the FOS and states that she thought you had to have legal representation in order to pursue a claim/seek redress – “and I didn’t want to go via a solicitor as that would be much more expensive”. They did not give her any advice on how the PPI cover could be affected, or that pursuing the UCCA could impact her credit rating. They did not advise her one way or another whether she should keep making her loan repayments, so she has continued to do so. She was told about the 20% on claims, but not the unsuccessful claims fees that were in the terms and conditions, or that there were penalty charges should you decide you don’t want the CMC to proceed on your behalf. They recently contacted Angie to let her know that financial hardship cases were still being processed but Angie has lost so much faith in them given the “hidden fees”, that she believes “more like they wanna know that you’re in financial hardship so they can sell you an IVA and screw you over that way”.
4.
Claims handling/investigation/management services: After the initial set of contact (information packs, forms, letters of authority), Angie has not heard very much from them. One call re: the court case and the impact on timelines. She chases them for
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information once a month and is frustrated as their phone number is an 0845 number and they always keep her hanging on the line to tell her that nothing has changed. She feels that they have trapped her with a low percentage on the returned claims, but the fees for unsuccessful claims and the penalty fees for cancelling their involvement have left her with little choice but to stay where she is. She has had similar experiences to other respondents in this study: that it is hard to track someone down and that they don’t respond to queries quickly.
5.
Fees: Angie strongly feels that they concealed charges for unsuccessful claims from her (£50 per bank/credit card charges and £150 per PPI/UCCA). She has lodged 10 claims with them so is frightened that she owes them £700; money she can ill afford. When she investigated not proceeding with the claims, they advised her that she would be liable for these costs regardless.
6.
Emotional impact: “All they’ll say to me is that I should have read the terms and conditions. The way they operate is deceivable, they deceived people…I have this niggle feeling saying that [I’m not going to get any money back] and hey presto, they’ve made their money on every case”.
7.
Situation now: “I can’t go here, I can’t go there. I’m stuck”.