Consumers ripped off by claims firms have route to compensation  

New legislation to help consumers challenge unfair treatment by claims management companies (CMCs) is a valuable step forwards. As the Ministry of Justice outlines plans for the Legal Ombudsman to gain new powers to tackle CMCs which break the rules, Citizens Advice calls for more action to to stop unscrupulous firms from treating people badly in the first place.

Gillian Guy, Chief Executive of national charity Citizens Advice, said:

“People have felt powerless against claims firms who promised big payouts only to take up front fees and not deliver a good service.  Consumers need a robust route to challenge claims management companies that mislead people or leave them out of pocket, so it’s good news that the Legal Ombudsman will soon be able to force them to give compensation.

“Companies must be up-front about the costs of making a claim, give clients proper cancellation rights and make sure that all consumers have a signed, written contract. From next year, the Ombudsman will be able to help people who fall foul of bad CMCs, but we need to see more action to stop dodgy firms from treating consumers unfairly in the first place. Our research has found that over 30 million people in the UK have been cold called about PPI alone, with only 2% of people saying that they had given permission to be contacted in this way. A ban on cold-calling by claims firms would let consumers know that anyone who contacted them out of the blue was not to be trusted.”

Case studies

A CAB in the East of England reported a case where a client had written to her bank to reclaim PPI after having seen media reports about the issue. The claim was processed by her bank and she duly received £3,500 in compensation. However, the letter from her bank indicated that she had made the claim through a CMC and would be responsible for paying the fee herself. She had no recollection of ever agreeing a contract with a CMC and insisted she had never ever spoken to one. The CMC began to pursue her for her bank details, insisting she owed them £1,200.

A CAB in Central England saw a client who had been harassed by a CMC into taking up their services. The client said the fee she would have to pay was not explained to her and when she received her compensation payment of £1,800 she was shocked to find the CMC expected almost £1,000 in fees. The client has received a number of letters from the CMC which are designed to look like a bailiff’s demand for payment which has caused her significant distress.

Notes to editors:

1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service 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 see the Citizens Advice website.
2. 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.
3. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
4. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
5. Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014  service statistics see our quarterly publication Advice trends
6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.