Thursday, October 25, 2012

PPI claim back firms prey on poor & vulnerable

Every day one can hardly fail to spot the constant flow of advertisements that offer to help claim back the millions of pounds put aside by banks for mis-selling PPI  [Payment Protection Insurance]. The 'no win, no fee' scenario can be persuasive for many since the procedure of claiming back PPI can sound complicated and cumbersome. Putting such a claim in the hands of a specialist company is thus quite appealing. Hand over the details, sit back, and await the post for a large cheque.

However, there is a downside. Many such companies charge more than a third of the total amount retrieved from the banks, and some individuals have even found themselves out of pocket with fees being charged beyond the amount paid out.

Investigations

A Daily Mirror investigation earlier this year showed that many people were ignorant of the fact they could claim back PPI themselves or wrongly thought the procedure was long and complicated. The investigation also uncovered disturbing evidence that the services offered by many claim back firms was mis-sold to customers, an irony given that the PPI they were trying to claim-back was itself mis-sold by the banks and other financial institutions.

High fees

The cheapest PPI claim firm identified by the newspaper charged a 12% success fee while the most expensive ones charged around 36%. Companies rarely reveal such details in their advertising, and try to soften such figures upon application by suggesting that a DIY approach, while possible, is "very stressful". One firm even told the Mirror journalist, who was posing as a customer, that attempting to make a claim oneself less rewarding. "It's a long process and you probably wouldn't get as much money," the adviser said.

A rather hollow statement given some customers are left in even more debt. One furious customer told the Mirror that despite being awarded £2,365 compensation the company in question kept the entire amount and demanded a further £890 to cover the 30% ­commission fee!

Do it yourself

"I never recommend going to any company that tries to get Payment Protection Insurance compensation for you," says Paul Lewis,presenter of BBC Radio 4's Moneybox programme. "First of all there's no point when you can do it yourself." And there are several organisations which have put up special pages to help people through what might on the face of it appear like a financial minefield.

There some claims that are more straightforward than others. If the loan was with a bank or other financial institution that still exists, and the loan is still current, making a claim can be relatively simple.

Even if original documents have been lost or misplaced one need not panic. Financial institutions will have their own records, and may not need any details other than the policy account number. Even where documents are needed the fee to obtain them will be small.

To start any claim one needs to establish whether one was actually mis-sold PPI. If self-employed at the time, the answer was almost certainly mis-sold a policy that was of little use or benefit and a claim will likely succeed. Other situations are less clear cut.

Advice

Moneysavingexpert.com and Which? both provide comprehensive details about what to check for and how to make a claim. Both sites, as well as the Citizens Advice Bureau, offer template letters which need only a small amount of additional detail or changes before being dispatched.

After signing and dating the letter it needs to be sent to the appropriate department at the lending institution. Most banks have special pages already set up offering details of how to claim and publish details of how to contact their complaints department.

Then comes the wait. Some banks or institutions may reply within two weeks acknowledging receipt of the said complaint, though one may not hear back for up to 8 weeks. Should one be successful, it could prove very lucrative. One customer, who was mis-sold PPI, told tvnewswatch they received some £15,000 back on a £24,000 loan. Not bad for a little time spent writing a letter and the price of a stamp. And no cut was taken by anyone.

Prey

PPI claim-back firms are effectively preying on people's ignorance and targeting people who can ill afford to lose even more money. Claiming back the money oneself is simple, and not as time-consuming as many might think.

While the Ministry of Justice cancelled the authorisation of 734 claims management firms in 2011, accounting for one in five members of the industry and double the number from the previous year, some are seeking tighter regulation.

Regulation

Martin Lewis of moneysavingexpert.com is calling for "hardcore regulation of this billion pound industry to stop their false claims, and gives redress when things go wrong". Meanwhile Richard Lloyd of Which? urged the Ministry of Justice to "up its game and speed up its plans to tighten up regulation".

As well as regulation, government could help solve problems by its own advertising campaign, informing people of how they might make claims themselves. Few see this as likely however. The government makes money through VAT it gets from the claim-back firms estimated to be in the millions of pounds.

Despite huge interest rates charged by pay-day loan companies, and much criticism in the press, government has failed to act. Until regulations come into being, the vulnerable and poor will continue to be preyed upon by unscrupulous companies, labeled by some as legal loan sharks. This week Lord Parry Mitchell of Labour's BIS team in the House of Lords introduced an amendment to the Financial Services Bill to give the new Financial Conduct Authority (FCA) the power to set guidelines on the impact of lenders' behaviour on consumers, which will, he writes, potentially include the capping of interest rate charges [New Statesman / Labour Lords].

Blame

While a certain amount of blame can be laid at the door of the consumer, those who get sucked into the claims by claim-back firms or pay-day loan companies, it can also be argued that such firms are acting immorally and deliberately targeting vulnerable individuals. The government may benefit from taxes drawn from these firms, but society as a whole does not. Legislation which brings an end to such irresponsible lending could have other beneficial effects. This week it was revealed that three suspects charged with planning a deadly suicide attack in Britain had tried to get funding from a pay-day loan company. While they failed in their attempt to borrow some £20,000 fro Yes Loans it raises the very real question over whether such companies could even prove to be a threat to national security [Guardian / Daily Mail / BBC].

tvnewswatch, London, UK

NB: MANY COMMENTS CONTAINING LINKS OR ADVERTISING TO CLAIMS COMPANIES HAVE BEEN DELETED, SUBJECT TO TERMS ALREADY LAID OUT BUT IGNORED. FURTHER COMMENTS NOW REQUIRE MODERATION DUE TO CONTINUED SPAMMING

15 comments:

Win goal said...
This comment has been removed by a blog administrator.
Johnson said...
This comment has been removed by a blog administrator.
Muhammad Amir said...
This comment has been removed by a blog administrator.
jhonsun said...

Niice post :)

Muhammad Amir said...
This comment has been removed by a blog administrator.
John Henry Goico said...
This comment has been removed by a blog administrator.
John Matthew said...
This comment has been removed by a blog administrator.
Ujiva Nelson said...
This comment has been removed by a blog administrator.
Calvin Brock said...
This comment has been removed by a blog administrator.
Jan Micheal Molinos said...
This comment has been removed by a blog administrator.
William Martin said...
This comment has been removed by a blog administrator.
Caleb Chong said...
This comment has been removed by a blog administrator.
Raul Wint said...
This comment has been removed by a blog administrator.
Elida Ramos said...

Interesting information I haven’t been through such information in a long time.
ppi

Elida Ramos said...
This comment has been removed by a blog administrator.