A host of so-called claims farmers could share millions of pounds if the big banks are forced to refund customers who were mis-sold payment protection insurance.
The claims managers, whose advertisements proliferate on daytime television and alongside internet searches, have submitted many thousands of demands for refunds. They are acting on behalf of customers who might have been misled by their banks into buying the policies, which cover loan and credit repayments if the holders lose their jobs or become unable to work.
Up to 80 per cent of the claims being received by the banks are from claims managers, rather than from customers directly, an investigation by The Times
The volume of cases received through these middlemen, some of which are aligned to law firms, has almost doubled in the past two years, according to internal bank figures. The development is fuelling concerns in the industry that “ambulance chasers” are taking advantage of the mis-selling scandal to line their pockets.
About one in five of the demands for refunds submitted by the claims managers is so speculative that the claimaint is not even a customer of the bank or has never held a policy, banking insiders said.
None of the big banks would comment. The British Bankers’ Association, the industry representative, also declined to respond.
More than a million customers who were mis-sold the cover are in line for refunds after the banks lost a High Court case. The Financial Services Authority estimates that the banks will have to pay £3.2 billion in compensation for past mis-selling and another £1.2 billion to customers mis-sold policies in the next five years.
The taxpayer-controlled Lloyds and Royal Bank of Scotland were the largest sellers of the insurance cover and therefore could face the largest payouts.
A substantial part of the refunds will go to the claims managers, who typically charge customers 25 per cent of any funds recovered. In cases paid out by the banks so far, the average refund is estimated to have been more than £2,000, implying an average fee for the claims handlers of £500. Spread over hundreds of thousands of cases, this would equate to tens of millions of pounds.
The claims management industry has mushroomed in recent years. According to the Ministry of Justice’s claims regulation unit, 3,177 companies are registered in the field, most of which are small operators and many of which have started to trade recently. Most specialise in personal injury claims, accounting for 2,552 of the companies on the ministry’s register. But businesses that handle claims relating to financial products, such as payment protection insurance, are the next most common, with 945 companies active.
The claims managers, whose websites promise quick, hassle-free recoveries on a no-win, no-fee basis, have been criticised by regulators and consumer groups. They have expressed concern that the managers take a significant amount of the refunds for work that customers could easily do themselves.
However, the Claims Standards Council said that the claims managers had played a crucial role in exposing the banks’ poor behaviour by spending millions of pounds on advertising. The industry lobby group’s spokesman Andrew Wigmore said: “The consumer has been educated of their rights to claim by the advertising, which of course the banks don’t like.” The industry has been working with the Ministry of Justice to establish protocols for settling claims quickly at a fixed cost to the consumer, he said.
The Financial Services Authority estimates that more than 16 million policies have been sold since 2005 and more than 1.5 million complaints have been received by the banks. The regulator issued guidance to the banks in August reminding them of their obligation to handle complaints fairly. The banks issued a legal challenge arguing that the guidance was not enforceable and clashed with previous regulations that the FSA had put in place.
In the High Court this month, Mr Justice Ouseley dismissed the banks’ challenge. The British Bankers’ Authority, which brought the case, is considering whether to appeal.
Brunel Franklin is one of seven trading names registered to Flairford Securities, a company based in Altrincham, Cheshire.
It pursues claims for PPI refunds on a no-win, no-fee basis, in return for taking a cut of 30 per cent of any funds recovered, including VAT. A typical claim takes about six months to resolve. Brunel Franklin also seeks refunds on behalf of people who believe that they have been hit with excessive charges by their banks for paying credit card bills late or for exceeding their overdraft limits.
Sally Bowyer, its managing director, defended the business. “Opting to use a claims company means you have an industry expert on hand to guide you through what can be a difficult and time-consuming process,” she said.
“Many people struggle to pursue a refund alone, as dealing with banks and insurance companies in unfamiliar financial territory can be a daunting prospect and feels like a minefield if you don’t know the rules.” has revealed.
Original Article: The Times
Source: Claims Standards Council
