Paul Clark CEO of Charter UK is calling for tighter regulation of claims management companies (CMCs) as industry figures reveal up to a quarter of the PPI claims they process are invalid."Industry figures, which suggest that up to 25 per cent of the claims banks are receiving from claims management companies (CMCs) are from claimants who never had a payment protection policy in the first place, are highlighting the size of the problem these firms are creating," said Mr Clark. "CMCs are required to perform a series of checks with a consumer prior to submitting a claim. With such a high number of invalid claims being processed by CMCs, I have to ask if they are doing these checks properly.
"Those who fail to adhere to this rule should be investigated by the Ministry of Justice and face punitive action. However, because the Ministry is under resourced, this is simply not happening. Our question is who should be looking at this? What is clear is that stricter regulation is badly needed. I have said in the past that the FSA underestimated the amount of effort that would be required by the banks to resolve the PPI backlog, with up to 20 million consumers who potentially have a claim, and with CMCs adding to this stress with erroneous claims, it is clear that for everyone concerned this discussion is a step in the right direction.
"What we have witnessed is that banks have been working around the clock to put systems and processes in place to not only respond to PPI claimants in a timely manner, but to proactively contact customers who may have already been sold PPI. Banks have made it easier than ever before for customers to contact them directly, and the technology that is being used is making the end to end complaints and claims system very much more streamlined. We have always said there is a correct way of making a claim, and banks are now more prepared than they have ever been to respond and resolve them in a way that is efficient to them, and fair to the customers."
Mr Clark's comments come as an emergency meeting was being held today (April 23) to try to stop the unscrupulous CMC's who exploit consumers. The PPI summit is being attended by all major banks and credit card providers, regulators and the Financial Ombudsman Service to try to get all parties working together to help consumers get the money they are owed and to help improve the PPI claims service.
Meanwhile research from consumer watchdog Which? and MoneySavingExpert.com has revealed that consumers are turning to CMCs because they don't know how to claim back mis-sold PPI themselves for free. In a survey of over 2,000 people, a quarter did not know that CMC's take a fee and only half knew that using a CMC would be no more successful than them making the claim themselves.
MoneySavingExpert.com's Martin Lewis said: "If people make a rational decision to give a huge 30 per cent of what they're due to a claims handling company in full knowledge that they could do it themselves I've no problem. Yet sadly very few are in that position. Many are persuaded under false pretences and the dire lack of regulation means it's tough to tell the legitimate firms from the rest."