During July, a fee cap on services offered by PPI claims companies was introduced. As of July 10th, companies charging more than 20% + VAT (24% total) were forced to cap their fees at this price point.
Since the emergence of the PPI scandal, hundreds of claims companies took the opportunity to set up services claiming PPI on behalf of customers. Many of these companies have since ceased trading or were given heavy fines for persistently cold calling customers. In January, one company was fined £350,000 for making 75 million cold calls in just four months.
In an attempt to clamp down on rogue PPI claims companies, the Financial Conduct Authority (FCA) is taking over regulation in April 2019. Businesses will need to go through the FCA authorisation process and comply with set rules and guidelines.
Until this point, an interim fee cap has been passed by the government to reduce the number of companies charging extortionate fees. It’s been known for some companies to charge customers in excess of 40% of their successful claim amount. Often, this charge was written in the small print and consumers were not aware that VAT would be added on top.
We asked a number of those working in the financial and claims sectors for their thoughts on the newly imposed fee cap.
What does it mean for consumers and claims companies alike?
Emma Drew, a prominent UK financial blogger says: “I think that the cap is a great thing for consumers.” She continues, “we all know that we can chase the claims ourselves, but sometimes we need the help of a PPI claims company for whatever reason. Having the fees capped means that consumers can get the help they need, without being taken for a ride.”
Kamran Mirshahi is the director of Canary Claims, a leading PPI claims company that has always charged well-below the fee cap amount. Kamran has dealt with customers who have worked with rogue PPI claims companies and welcomes the cap. He says: ”It’s about time that a fee cap is in place with a ban on upfront fees. In the past, we’ve come across many consumers who had been charged upfront fees with nothing to show for it.”
He hopes that the cap will change the negative view of the claims management market: “The main gripe with the industry has been unfair high fees charged for successful claims. Hopefully, this can now be put to rest.”
Dayna Byfield, a financial and investment specialist, believes that claims companies which always do right by their clients will come out on top: “The fee cap actually presents an opportunity… The cream always rises to the top, as they say. The gold standard of companies will be best placed to take on additional clients utilising word of mouth referrals and potentially cross-sell other products and services.”
While there is no doubt that the cap is good for consumers, Yaakov Smith, founder of Logican, believes the pressure is on for claims companies: “While the cap is clearly good for consumers, claims management companies are now under pressure to maximise the efficiencies of their processes to ensure they remain profitable. Our customers benefit from the incredibly high level of automation that our software provides, which significantly reduces the overhead in running claims and brings them to a successful conclusion as rapidly as possible.”
What will happen to the claims management market?
With the fee cap only recently introduced, nobody yet knows what will happen to companies that relied on higher fees to keep business afloat. It’s likely that some companies will not be able to handle the cut and could go out of business.
The majority of PPI claims companies which already charge a low fee of 20% will have the financial stability to continue, but the pressure may increase, with other companies now charging a similar price. With just over a year before the PPI deadline, consumers will need to decide soon if they want to make a claim.