The Ministry of Justice has launched an investigation into claims management companies after a wave of invalid compensation claims on behalf of customers allegedly mis-sold payment protection insurance.
According to the Financial Times, the move comes after the ministry received a number of complaints from banks over the issue.
Around 80 per cent of PPI claims now come through claims management companies. The FT reports that a vast amount of these complaints are now being rejected.
Santander UK said 40 per cent of the claims it was now receiving were invalid, while Barclays estimated invalid claims at 40-50 per cent. HSBC said that of the claims submitted by claims management companies, a third either had no link to the bank, or no PPI policy had ever been bought. Lloyds is dismissing approximately a third of its claims, while Royal Bank of Scotland says it is rejecting a fifth of claims.
Banks have made a provision of around £6bn for mis-sold PPI, with £1.9bn paid out in 2011. Lloyds has made the largest provision for mis-sold PPI, having set aside £3.2bn.