In 2011, banks paid out £1.9bn in PPI compensation claims as a result of mis-sold insurance on personal loan products. FSCS warns about CMC compensation pay cut
The FSA have said that during 2011 banks paid out £1.9bn in PPI compensation claims due to incorrectly sold insurance on personal loan products.
After the High Court Case in April 2011, the banks were told to process 200,000 complaints, however since April this number has increased rapidly which could result in the banks paying out £8bn on PPI claims.
Usually consumers receiving remuneration on their PPI policy have received on average £2,000, however some have received larger figures due to the unsuitable nature of the advice given at the time of sale.
As a result of the influx of compensation pay outs, Claims Management Companies (CMCs) have been appealing to consumers by upping their marketing campaign, increasing their television advertisement as well as contacting customers directly by text messaging to encourage them to process claims via their company.
Mark Neale, Chief Executive at the Financial Services Compensation Scheme (FSCS) has advised that people looking to make a claim can “save thousands by submitting their claims directly to the FSCS rather than through a third party”.
Consumer groups have warned customers against using CMCs as they take a 25% cut of payment and are “no more likely to make a successful claim than consumers on their own”.
It is felt that the claims process may seem daunting to consumers, however the FSCS have encouraged customers to submit claims directly to themselves rather than using CMCs to save them money.