Unjustified fees, contractual disputes and delays all feature in latest Legal Ombudsman report on claims management companies (CMCs).
Mis-sold payment protection insurance (PPI) is the UK’s biggest mis-selling phenomena of its kind, with banks setting aside more than £26 billion in compensation; but for many people, claiming back costs can be the most stressful thing about it.
Our latest report shows that, sometimes, claims management companies actually make claims more complicated as a result of unjustified fees, delays, and poor advice.
During the first six months since launching its CMC jurisdiction in January, the Legal Ombudsman was contacted almost 9,000 times – an average of 1500 contacts a month. The scheme accepted 648 complaints for investigation, resolving 478; with more than half (53%) of those resolved requiring a remedy to put things right for the customer.
Almost half (40%) of the disputes were about costs. For instance, unjustified fees, a failure to refund upfront fees, or because of contractual disputes. Around a quarter (23%) were about delays in progressing claims or a failure to progress cases properly at all. Failures to provide adequate advice or keep customers informed were also key causes of complaints. The average financial remedy ordered was around £650.
The report “Complaints in focus: Claims management companies” includes case studies documenting real experiences of customers who ran into trouble. Richard Day, from Dorchester, was charged more than £3,000 by his CMC despite not receiving a penny of his claim. The CMC retrieved mis-sold PPI payments but failed to explain that his previous bankruptcy (he was made redundant from his job of 22 years and got into debt) meant all of the money would be paid directly to the Insolvency Service.
The Citizens Advice Bureau helped Mr Day complain to the CMC before guiding him to the Legal Ombudsman. A subsequent investigation found that the company’s application form suggested only that current insolvency proceedings needed to be disclosed. As a result, we ordered the CMC to waive its fees in full.
Research commissioned by the Legal Ombudsman has found that more than two thirds (76%) of the public are not confident that CMCs tell the truth to their customers.
Key concerns are that they are not confident their rights are protected by CMCs or that a CMC would handle their complaint properly. A third of CMC users said that they wouldn’t know who to complain to if something went wrong with the service they received.
The Legal Ombudsman’s Head of CMCs, Simon Tunnicliffe, said: “The case studies demonstrate how frustrating and time consuming poor service can be for the people it affects. They also support the case for an improved approach to complaint handling within companies’ own customer service teams.
“We are pleased to have been able to help all those people who have contacted us so far. This report highlights the benefits of having a dispute resolution scheme in place to mitigate against the consequences of poor service.”
A spokesperson for the local Citizens Advice Bureau said: “This is an excellent example of partnership working; the Legal Ombudsman were the crucial difference in getting a result for our client”.