Since the mis-selling of PPI was headlined in the news, cold-calling by claim management companies has also attracted attention from the press. Can these companies be useful to you?
What are claims management companies?
These companies are often known as CMCs and have frequently featured in recent news reports; they act as an intermediary between a claimant and a company, when a legal or financial claim is made.
How do claims management companies work?
They act in the same way as a firm of lawyers by representing you in your claim against a financial company. They handle a variety of claims from personal injury to financial, claims management
Do I need a claims management company to claim PPI?
To claim PPI it is not necessary to go through a claims management company. It can be a very easy process to undertake yourself and avoid unnecessary expense
However, a claims company can take the stress and hassle out of having to confront the company yourself and deal with the paperwork. This can be a huge advantage if you are recovering from injury or need to devote time and energy to work or family.
Why do you need to use a claims management company?
If you are claiming compensation against a company after personal injury, for example, the management company will act in a legal capacity representing you; they will act on your behalf against the company from which you are claiming. Your advisors will deal with the paperwork and communications, instead of you having to pursue the claim alone.
How to claim PPI
It is a good idea to find out first if you are entitled to PPI compensation before pursuing a claim through a management company and paying their fees.
The first step is to read your original documentation and see if you can find the words ‘PPI’, ‘cover’, or any form of extra payments added to your loan amount; if you do not possess your original documents, ask your financial services provider.
When you have ascertained whether or not you are covered for PPI, you can see if you have been mis-sold PPI and are eligible for a claim.
One of the main items that would qualify you for a claim is if you were not aware of the PPI being added or it was not fully explained to you, it was unsuitable as you had other cover or that you could not make a claim because you had a pre-existing medical condition that was directly associated with your injury.
If you feel you are eligible to make a claim, gather all your documents: the original loan agreement, statements and correspondence between you and your lender. You can then get in touch with your financial services provider.
There are template letters online that can help you formulate your correspondence, but the main things you need to include are: any reference numbers or names of a complaints handler you were given; your credit reference and PPI number if you already have one; when the policy was taken out; what product it was tied to, and why you think you were mis-sold the PPI.
Should you then find you are unsuccessful or the response is inadequate, you can take your case to the independent Financial Ombudsman Service, which is free.
How do claims management companies make money?
You will usually be charged a percentage of the total sum of money that is recovered, once the case is complete.
A claims management firm will typically charge you a percentage of the total fee that is recovered once the case is settled, rather than a fixed lump sum. However, some firms may charge you a fixed amount up front, or upon completion of the case, or possibly both.
The claims companies that charge no upfront fees and only a small percentage of the total amount of money recovered are the best. It is even better when they charge the fee as an extra amount on top of the total settlement as opposed to a percentage of what you take.
The worst case scenario is when a firm charges you upwards of 25% of your final settlement amount, on top of an extra fee; they may also take a long time to fulfil the claim and not keep you properly updated and informed.
Why do I need to use a claims management company?
Payment protection insurance (PPI) was created, as an integral part of loans to provide cover for things like repayments on outstanding debts as a result of injury, accident or unemployment.
However, it was often badly communicated, ignored or given to unsuitable people such as those with a pre-existing medical condition or self-employed people who would not qualify for a PPI claim, even if they lost their income revenue. Due to the mis-selling scandal, these people were given an inappropriate and expensive insurance policy they didn’t need.
After several legal challenges and court rulings, banks and financial providers agreed to pay back any insurance payments that had already been made, plus 8% interest to cover lost earnings.
With the complexities of PPI, together with continuing court battles, many individuals shied away from making a claim without support, hence the rise to prominence of claim management companies.
The firms offered an alternative route for people to present their cases when up against resistance from banks; after a High Court ruling, all financial firms are required to deal with PPI claims. In the event something goes wrong, there is a safety net: the Financial Ombudsman Service provides a free arbitration service.
It is therefore quite possible to claim by yourself, and receive no less compensation as a result, without outside support and without paying out a fee to a claims management firm;
Since many claims run to thousands of pounds, for a claim company charging 25% it can be a lucrative business. If you were to claim just £5000 in PPI compensation, you could stand to lose £1250 of that by allowing a claims company to manage the claim for you.
The DIY route may be a far better option.
Compare Life Insurance
Get quotes from the UK's leading Insurance Providers in Minutes