Reclaiming payment protection insurance (PPI) has gotten much easier since the banks threw in the towel a month ago and put Â£6 billion aside to pay out consumers. But claims handling agencies are leaching on top of this, charging 30%+ to process claims most people can EASILY do themselves. We currently have a ‘don’t use ‘em’ stance â€“ yet some are using these companies anyway and there are scammers out there â€“ so should we tell consumers the least worst and most legitimate?
I’ve been wrestling with this for a long time and would like your views. When the banks put their hands up I thought, as reclaiming would become much easier, claims handlers would go away. But the opposite has happened, they’re on a huge marketing push. For example, one of my team, who has NEVER had PPI received this outrageous textâ€¦
Wow! Free Message! Important! Our records indicate you may be entitled to Â£3,750 from mis-sold insurance. To claim reply, Yes"
Of course, everything needed for DIY reclaiming, including template letters, is in our PPI reclaiming and credit card PPI reclaiming guides. There are also other consumer groups, like Which? that offer reclaiming info for free too.
Yet, the claims handlers still have enormous customer numbers perhaps dwarfing even our own, and we’ve had 1.2 million template letters downloaded. But before looking at the options, I want to spell out my stanceâ€¦
- Is it ever worth using claims handlers?
There are some exceptions in our view to the ‘never touch them’ rule. If you are functionally illiterate, so that filling out forms is impossible, have mental health issues where the stress may be too much, or have a rare case of pre-2005 non-bank mis-selling, which means it’s not covered by the FSA so you’ll need to go to court â€“ then using a claims handler may be your best route.
- How much do they cost?
I was shocked at a report by BBC1 Watchdog the other day, which found that many claims handlers charge well over 30% now. So, on a typical Â£1,500 reclaim this means claims handlers get a huge Â£500+. This is ludicrous considering a good chunk of people are due to be contacted by their bank to be told they were mis-sold. Plus, many others can reclaim by simply using information on the web and at most it involves going to the free Financial Ombudsman Service.
Some claims handling firms even charge an upfront fee, which is a complete no-no. If you are going to use a firm, at least make sure it’s on the basis of no win, no fee with a max 25% success fee.
- There are serious scammers out there
Not all claims handling firms are dodgy, in my view they’re just often vastly over expensive for what they do. Yet, there are certainly some very bad apples out there and we’ve seen many people duped into handing over money and never receiving a service or a refund.
So do we retain our blanket ban?
The problem is a pretty simple one. We don’t like claims handlers for PPI on the whole, but people do use them and it’s bang in our territory. Some of them are dodgy, so should we be researching or telling people which the cheapest and most legitimate are (of course having first said DONT USE)? Or does that conflict too much with our ‘don’t use them’ stance?
In past brainstorms with my team, before the banks threw in the towel, we did come up with a couple of radical ideas on how to do this â€“ I even contemplated calling Which? and mooting a joint project for the followingâ€¦
- Setting up our own claims handler. If people want it, why not do it for them non-profit, with as low a fee as possible? Though I worry this is too close to being a product provider and I simply don’t have the personal resources to run and manage something this big â€“ which is also a wider reputational risk if I put my name to it.
- Setting up a panel system with redress. We could have a recommended and policed system of providers, (with a price cap on their charges) with dedicated staff spot checking and policing policies. As well as an in-built redress system where we could adjudicate people who haven’t been treated well. To do this though, we’d need to charge the claims handlers a fee to be a member to offset the large costs.
Both of these are pretty radical and a step away from what we do now. A cut down version would be writing a guide on claims handlers and their charges and monitoring feedback on them, although again this doesn’t give any real surety apart from on reputation and cost.
My worry is, that with whichever method we choose, it’d be tough to do without giving the wrong message that we’re pro claims handlers.
I would love your thoughts via the forum or comments links below.