Ministry of Justice launches investigation into PPI claims
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.
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Readers' comments (15)
I hope the banks file complaints against the claims management companies for fraud, false applications, wasting time and clogging up our tv screens with crap adverts and even worse acting. Especially when I'm trying to watch Columbo.
Not that I like the banks ( bunch of money grabbing ex FSA employees).
This is long overdue. The reason it has been allowed to go for so long is due to the commercial ignorance of bodies such as the MoJ who are supposed to regulate. Not only did they seem to underestimate the way in which unscrupulous claims managers would latch on to this type of claim for a fast buck but they, along with the FSA have failed to realise the cost that is incurred to advisers/business which are falsely accused.
Many decent solicitors have for years fairly and rightly stood up for consumer rights and against mis-selling but have now decided to exit this area of law purely because their reputation is being harmed by unscrupulous claims managers and 'lawyers' who want a fast buck.
The MoJ needs to 'develop a back bone' and start looking out for real claimants' rights which are sadly being overlooked because decent solicitors, decent financial advisers and decent clients are being 'drowned out' by the bogus scum.
If anybody receives a text, unsolicited phone call or direct marketing piece from any claims company or solicitor they should report this to the MoJ as this is strictly prohibited.
Its about time the MOJ has decided to do something. These firms are a purge on society. MoJ needs to put in place a simple but effective strategy that places submitting complaints impossible unless these CMC have indisputable evidence that a claim is valid or they should be forced to pay £500 per claim to the banks to investigate the claim. This could be reimbursed as part of any settlement. I am no lover of what the banks have done (in fact I think some of the banks are only slightly better than the CMC) but this costs them money and it is their customers that ultimately pay the bill.
My son came home last week and told me he was entitled to a claim for mis-sold PPI from his bank RBS according to a claims company.
The irony is he has never had a loan, credit card, mortgage, etc. The worst he had was an authorised overdraft. There is definately something fishy about all these claims .... a bit like my whiplash claim last year for the accident that has never happened. Same happened to my wife the year before.
MoJ better late than never! Can we have some tough action please before the UK becomes a complete laughing stock.
These companies have been indiscriminately cold call and trawling phone numbers, I have been called three times, Greg's experience comes as no surprise. While they are at it, please can someone get them onto the Wonga people, I can never see an APR in their advertisement, I would say that "sliders" lead to skid row, we have sunk to new depths in what is being allowed.
Like many readers I also receive several calls daily from CMC about PPI claims and that I would be owed thousands of pounds. MOJ are not doing their job of regulating and their members are fleecing the public with huge fees. The whole compensation and mis selling culture has gone out of hand and the regulators, unfortunately will continue on this path because it provides them with employment. The government has turned a blind eye because it perhaps want demise of IFA community.
The problem lies in the formulaic approach taken when claims are investigated by FOS. They have a history of placing too much emphasis on what a firm can't prove in its defence rather than the accuser being able to substantiate their complaint.
Once the claims handling industry sussed the formula, precedent was set and this together with a no cost or comeback on the complainant or handler means that people are just going to try it on.
This will get worse if as announced by the FSA yesterday, the FSCS is allowed to make compensation payments without investigating cases and of course firms have little if any effective protection or right of appeal.
I thinks someone, somewhere needs to have one of those moments involving coffee and waking up!
The MOJ have been slow to act and I'm afraid that the PPI issue is nothing compared to the "debt reduction" boys who are simply fleecing people. While IFA and mortgage brokers are continously jumping through hoops, arrrrgggh. I whish I could name names, but all I would say is that these debt reduction companies hide on the fringes of debt management, but are a different beast altogether and though debt management companies can be good to awfull, they are nothing compared to these money laundering tea leafs.
I rejected a complaint from an ambulance chaser on behalf of an IFA earlier this month on the grounds that the complainants never took out PPI,
The complainant was told in no uncertain terms that if he allows his ambulance chaser to go to FOS it will be treated as attempted fraud.
Only 40-50% invalid?? We have sold 2 PPI policies since FSA regulation in Jan 2005. We removed our permissions the following year. Yet we still receive up to half a dozen complaints a week insisting we mis-sold non-existent PPI.
These companies need to ensure they have evidence of the client's loss before firing letters off to all and sundry. I have taken this issue up with the MoJ in the past but they don't seem to have done much about it.
How many of these claims firms are run by people who used to sell PPI? I've also flagged this up to Which? and they were interested in this angle. Some of the claims firms are run/owned by people who have existing FSA-regulated businesses even.