The Government announced yesterday that the Legal Ombudsman, set up in 2010 to resolve complaints about lawyers, will be able to investigate grievances from the public about how claims management companies (CMCs) have dealt with mis-sold Payment Protection Insurance (PPI) on their behalf.
According to the Ministry of Justice, there have been many more complaints against companies handling PPI claims compared to other types of claims companies, such as those dealing with personal injury and unfair bank charges claims.
PPI was sold by the banks as cover for borrowers’ loan repayments if they fell ill, died, or were made redundant. It was packaged along with products such as loans and mortgages, all too often without the customer’s informed consent.
Furthermore, some customers found that these insurance policies were almost impossible to invoke; while others did not receive the expected refund of premiums when they paid off their loans ahead of time.
After strenuous campaigning by consumer groups and a string of court cases, the banks have started to pay out huge sums overall to compensate the many thousands of customers who claim they were mis-sold PPI.
At the same time, CMCs have proliferated to number around 3,000, and they have been marketing their services aggressively.
However, if they win a claim for a customer, the CMC will generally take up to 25% of the compensation paid out by the bank as their fee.
According to the Telegraph, the Legal Ombudsman will take over the role of complaints adjudicator from the Claims Management Regulation Unit (CMRU), which is part of the Ministry of Justice, in 2013. The Ombudsman has the legal power to obtain compensation for consumers.
The CMRU will be left to improve standards for the industry as a whole, and target CMCs that regularly flout the rules.
While consumers can make a claim about mis-sold PPI individually for free, many people may feel challenged by dealing with large institutions on their own.
The visible presence of claims companies has at least alerted the general public regarding PPI mis-selling, although they can consult their own solicitor about making a claim if they wish.