9 in 10 plagued by claims firms, cold callers and text pests

14 Tachwedd 2012

Claims management companies should be banned from cold calling as new figures show 9 in 10 people surveyed were pestered by calls, emails and spam texts from these firms within 12 months - with seventy two per cent about making a claim for PPI.

That’s according to Citizens Advice as it launches a new report ‘The claims pests’ exposing how claims management companies harass people in their homes in order to get a £2 billion* cut of PPI compensation.

The report brings together a wealth of evidence from across the Citizens Advice service including a poll of 300 consumers who visited www.adviceguide.org.uk, a detailed analysis of 288 client cases about problems with claims management companies and PPI, figures from the consumer helpline and details of financial losses from high fees.

Citizens Advice is urging consumers to put the phone down on these cold callers and go straight to their bank to make a claim.

Claims companies take around 25 per cent of a person’s successful PPI claim in charges. Data from Citizens Advice Bureaux across the country found people were spending, on average, over £1,100 in fees for something they can do themselves for free. One CAB even saw a client who paid over £4,000 in charges.

And some are charging up front costs of £600 – without being clear if the consumer will get any sort of payout. Citizens Advice is also calling for a ban on up front fees as firms often fail to deliver on claims, making claimants worse off than before. One in five CAB clients were lead to believe they can make a claim for PPI without ever having or being mis-sold a policy.

These excessive costs are pushing people into hardship with one in four CAB clients in debt or financial trouble after forking out the fees.

In the last seven months, the Citizens Advice consumer service handled over 4,800 queries about claims management companies offering PPI compensation services. And bureaux dealt with 43 per cent more problems concerning PPI in the last twelve months, 3,200 of these problems concerned claims management companies.

CAB advisers uncovered a worrying array of problems experienced by clients:

One in six had unauthorised fees taken from their bank account;
Thirteen per cent had paid high fees despite not getting any sort of payout;
Two in three had been mislead and experienced high pressure selling tactics – despite this being outlawed by the Conduct of Authorised Persons Rules;
One in three had been charged excessive fees compared to the compensation they got;
Twenty eight per cent said the fees were unexpectedly high based on the information they had received;
The average compensation gained was just over £3.100.

Citizens Advice Chief Executive Gillian Guy said:

"People should give cold callers the cold shoulder and go direct to their bank if they want to make a claim for PPI. We’re advising them to ignore any unsolicited calls, texts, letters or emails from claims management companies.

"These firms are intimidating people in their home and wasting a lot of people’s time – and in some cases money when they make a claim and nothing comes of it. They’re not up front with their customers about fees, are charging excessive costs and aren’t getting people the payout they deserve.

"Banks can stop their customers falling victim to these companies by doing more to tell them about mis-sold PPI and the compensation they’re entitled to.

"But it is vital that the regulator introduces tougher measures to protect people from predatory claims firms. People were endlessly pestered about making a claim for an accident, now it is PPI and there will undoubtedly be another consumer crisis they try to exploit."

Bureaux across the country will be advising people to put the phone down on cold callers, ignore spam texts and forward messages to their mobile phone provider (see end for top tips).

The report comes in National Consumer Week 2012 (12- 19 November) as Citizens Advice joins the Trading Standards Institute, OFT and Action Fraud to help people deal with cold callers.

Companies are breaking the law by invading people’s homes with intrusive telephone calls, emails and text messages, without their permission, trying to lure them into making a claim for mis-sold PPI.

Claims firms are banned from cold calling in person under the regulatory rules but have the green light for other cold calling as long as it is in accordance with the Direct Marketing Association’s voluntary code. Forty-six per cent of people who were phoned at home are registered on the telephone preference service – a list that bars marketing calls.

Citizens Advice isn’t the only organisation who is getting complaints about cold callers - Ofcom have reported a 190 per cent increase** in the number of complaints about cold calling.

Citizens Advice wants tougher regulation and changes to how consumers are compensated including:

Banks and regulators to speed up checks on PPI policies sold so that all customers are told about possible entitlement to compensation.
All cold-calling banned in the claims management regulator’s Conduct of Authorised Persons Rules.
Claims management companies barred from charging up front fees.
Fees should only be in proportion to the compensation gained and paid at the time of payout.
All contracts to be signed in writing by the consumer.
A standard written contract that provides clear consumer information on risks and cooling-off rights.
A ban on all claims firms from entering into any arrangements with third parties (eg ‘sim-farming’ marketing companies) trading in personal data, and immediate enforcement action against those that do.
A review of the whole system of claims management regulation to ensure it protects consumers and that the regulator can use the full range of consumer protection law.
The Ministry of Justice to work closely with Ofcom and the Information Commissioner and other relevant law enforcement and regulatory agencies to tackle marketing and data abuses in the claims management sector, share data about it, and deliver a common enforcement strategy.

Top tips to give cold callers the cold shoulder

Ignore spam text messages.
Put the phone down on marketing telephone calls.
Be careful how you share your personal contact details.
Forward spam texts to your mobile provider for them to take action: 7726 for Everything Everywhere or O2, 37726 for 3, 87726 for Vodafone.
Report any scams to Action Fraud on 0300 123 2040.
Make a claim for mis-sold PPI yourself by contacting you bank directly.
Get advice about claims management companies from the Citizens Advice consumer service on 08454 040506 (or Welsh speaking 08454 04 05 05), online at www.adviceguide.org.uk or from your local CAB.
Complain to the Information Commissions Office about spam text on 030 3123 1113.

Fact file

People are being left in the dark by claims management companies when they first contact a possible client:
- Two in three don’t tell people how much they would charge for their services
- Seventy-two per cent don’t say when they will charge their fees
- Four out of five do not give information about their cancellation rights
- Just 43 per cent say what would happen if you took out a claim
- And less than half were clear about people’s chances of success (source: Citizens Advice consumer poll).There are 5000 authorised claims management firms.
There are 40 complaints a month about dodgy claims companies (source: Ministry of Justice, Claims Management Regulator annual report).
240 were struck off last year for breaking the industry rules (source: Ministry of Justice, Claims Management Regulator annual report).
Sixty per cent of people who were pestered by a claims firm got a telephone call and a quarter received a spam text (source: CAB consumer poll).
One in five CAB clients were lead to believe they can make a claim for PPI – without ever being sold a policy (source: CAB adviser survey).
There has been a 66 per cent increase in the number of claims for mis-sold PPI by claims management companies (source: Ministry of Justice Claims Management Regulator annual report 2011-12).

*Source: Financial Ombudsman Service

**Source: Ofcom, Telecoms Complaints Bulletin, August 2012

Notes to editors

The Claims Pest report draws on a wealth of evidence from across the Citizens Advice service including an online survey of over 300 consumers who had been contacted by claims management companies. The survey was run in August 2012. Part of the study involved in expert analysis by CAB expert on 288 cases of clients having problems with claims management companies. The average from fees, charges and compensation gained were calculated based on evidence submitted by CAB advisers. View a copy of the report.
The Government is consulting on ‘Proposals for amendments to the Conduct of Authorised Persons Rules’. View the Citizens Advice response.
The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see www.adviceguide.org.uk
Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.9 million problems from April 2011 to March 2012. For full 2011/2012 service statistics see: www.citizensadvice.org.uk/press_statistics
Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable. (nfpSynergy’s Brand Attributes survey, May 2010).
Most Citizens Advice service staff are trained volunteers, working at around 3,500 service outlets across England and Wales.