Misleading advice, unfair contract terms and a lack of transparency about fees are commonplace among claims management firms, according to Which? following its undercover investigation of claims management companies.
Which? and MoneySavingExpert.com are joining forces to call on claims management companies to clean up their act and stop misleading consumers.
Posing as someone who thought they might have been mis-sold payment protection insurance (PPI), Which? mystery shopped 25 claims management companies. Which? says most of the companies called didn’t follow the rules set out by the Ministry of Justice (MoJ), and Which? identified problems with every company investigated.
Two thirds failed to advise the caller about the Financial Ombudsman Service (FOS), despite being required to do so. One said ‘if the bank rejects your claim, there’s nothing you can do’.
Six repeatedly told the caller they had more chance of success or would receive more compensation using a CMC than by submitting a claim independently. Which? says that WeFightAnyClaim, for example, told the caller ‘you have over a 90% chance of claiming it through us, or under a 10% chance of doing it by yourself’. Claims management companies are prohibited from making such claims.
Three of the firms – Aims Review, WeFightAnyClaim and Tucan Claims – charge upfront fees, and some asked callers for payment over the phone. In a separate survey, half of people who have used a CMC told Which? they were cold called.
Which? also found contract terms that were unfair. The typical fee charged by a CMC is 30% of the compensation received (25% plus VAT), but the definition of ‘compensation’ varies. Consumers might assume that the fee would be calculated based on the lump sum of money paid to them, but some firms include a reduction in future loan repayments as part of the compensation. As a result, some people could receive far less than they expect, and in some cases even end up owing the CMC money.
Richard Lloyd, executive director of Which?, said: “Claims management companies must clean up their act. All too often
