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PPI Scandal: '25%' Claim Fees Under Fire

(c) Sky News 2012

Firms that offer help with payment protection insurance claims are facing demands for tighter regulation as they are accused of cashing in on mis-selling practices.

A summit of banks and consumer groups is being held to help raise awareness about the issue as research suggests that a quarter of people are unaware that claims management companies (CMCs) charge a fee.

According to the survey for Which? and, 25% were unaware that CMCs cost them money - usually 25% of their claim plus VAT.

Only half of those questioned knew that using a CMC (BSE: CMC.BO - news) would be no more successful than making the claim themselves, the groups said.

More than half of those who had used a CMC to get back mis-sold PPI said they would be unlikely to use one again, the research found.

The biggest complaint was about value for money, with 37% of consumers unhappy.

UK banks and other credit card lenders have been compelled to contact potential victims of PPI mis-selling and together the industry faces a bill above £10bn according to estimates.

The mis-selling of PPI, which covers a person's financial liabilities in the event of sickness or redundancy, prompted a wealth of CMCs to launch a flurry of advertising campaigns.

Which? and, who are attending a meeting with ministers and representatives of the banks, are launching an advertising campaign aimed at informing the public on how simple it is to make a claim.

The groups believe trust has been lost on the reclaiming process and they blame CMCs.

Martin Lewis, of, said: "Sadly PPI has become a cash bonanza for unscrupulous claims companies, who through a series of lies and misdirection are persuading people they are the only option for getting their PPI money back.

"Even I've been texted to be told I'm owed £3,000 PPI - though I've never had the product."

The consumer groups are calling for the CMC industry to be better regulated.

Richard Lloyd, Executive Director of Which? added: "They're saying (the CMCs) come to us and we'll get you more compensation, faster. It's simply not true.

"What people are ending up doing is paying a massive chunk...of their compensation in fees to commercial companies to do something you can do straightforwardly yourself for free."