Time for Change PPI claims companies are looking for a new target
Action needs to be taken now to avoid a new mountain of vexatious claims, says David Wylie, Director of LendingMetrics. Many claims management compa- nies have been casting around for new income streams now that the door has shut on PPI, a market which has been really good to them. Some £39 billion has been handed out to consumers, of which the claims companies have kept up to 30%. Market experts reckon that the full cost of PPI will come in at nearer £50bn - five times the cost of the London Olympics. That’s an income for claims companies of between £10bn and £15bn. Nice work if you can get it. Little wonder that they are casting around for new targets. They want to keep their extremely profitable model going and have huge operations to feed. It has to be said, undoubtedly, that over the years there were an awful lot of gen- uinely mis-sold PPI policies out there. If you were looking to take out a loan in the 1990s and early 2000s, there was a
high probability that a bank would say at some stage in the application process that success was heavily dependent on having PPI. But, equally, there is really no doubt that there have been an escalating propor- tion of claims that were unfounded. Claims management companies have played the system, knowing full well that banks would often not have all the documentation necessary to prove PPI was correctly sold. They also knew that each claim for- warded to the Financial Ombudsman Service would cost the lender a stand- ard £550 fee, plus the considerable manpower cost involved in processing, so lenders were willing to settle, just to get claims off their radar. Lenders often had veritable mountains of claims that had to be turned around in the timeframes set down by the regula- tor. Get behind, and they were looking at even steeper costs. The claims chasers knew this, and the fact that there was no downside for either the claimant or for them.
As Barclays finance director Tushar Morzaria admitted this summer, claims companies had been ‘swamping the bank with vexatious claims’. Well, those that are in any way involved in consumer lending or providing investment products, now need to sit down and take a deep breath. These self-same claims compa- nies that have spent the past 10 years perfecting the art of secur- ing PPI compensation, often on flimsy grounds, are in the process of turning their full attention on you. The 1,500 claims management companies - that sent out 2.7 billion unsolicited calls, texts and emails every year during PPI, the equivalent of 50 per adult per day - are now focusing their efforts towards chasing claims of mis- sold consumer credit.
06 | Metrics Monthly
September 2019 | UK Edition
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