I'm pleased with my professional complainers
THE MAIL ON SUNDAY - 18TH MARCH 2007
A new type of company has been winning payouts for victims of an insurance scandal. But would their clients be better off going into battle on their own?
Controversial claims firms that target borrowers who have been mis-sold payment protection insurance are reporting the first wave of successful settlements. These come amid widespread concerns from consumer groups who say the claims companies give customers a poor deal. Payment protection insurance is taken out alongside credit card or loan agreements and is supposed to provide a borrower with the financial security to cover the repayments if they become ill or lose their job.
But the market, worth £5.5 billion in annual premiums, is mired due to claims of widespread mis-selling.
Conkers, a subsidiary of endowment claims company Brunel Franklin, has just won customer Matthew Green nearly £12,000 from loan company Picture Financial after bringing a case for mis-selling. It is the first payment protection insurance case it has settled.
Oasis Financial, which relies on cold calling to find customers, has won about 30 compensation cases for those mis-sold cover, including some who were sold insurance despite already being unemployed or having existing medical conditions that would prevent them claiming.
According to Conkers, 30 million people may have a payment protection insurance mis-selling claim.
Oasis Financial's Simon Hatch says: 'Many people are not even aware that they have payment protection insurance. We expect to see the number of people claiming to rise rapidly.'
Last year, Financial Mail reported how claims firms were springing up and encouraging consumers to settle their claim through them. But experts say victims should take their own case to the Financial Ombudsman Service.
Pula Houghton, spokesman for consumer watchdog Which?, says: 'There is no need for consumers to go to a claims firm. It is simple for borrowers to take their case to the FOS themselves.' More than 40 per cent of payment protection insurance cases brought to the Ombudsman are upheld and there seems little difference in success between claims made through specialist firms and those made directly.
Simon Burgess of standalone payment protection insurance provider britishinsurance.com set up a payment protection insurance claims service last year. But he withdrew it in favour of offering free advice to consumers on how to complain to the Ombudsman.
He says: 'We have had more than 100 people contact us for help and without exception we have advised them all to take their case directly to the Ombudsman.' Many of the claims firms, including Conkers and Oasiss Financial, work on a no-win, no fee basis. Such companies typically charge a fee of about 25 per cent of the compensation awarded. Ian Allison, corporate relations director for brunelfranklin.com and conkers.co.uk, says: 'Each payment protection insurance case is different and through our extensive industry experience and knowledge we quickly know if an offer made by a vendor is wrong.
'Most of the offers we have received so far from payment protection insurance policy sellers have been wrong. The consumer is likely to accept the first offer that is made.'
Matthew Green, 41, from Stenson Fields, near Derby, took out a 25-year secured loan with Picture Financial in April last year. The loan was for £45,000 but with payment protection insurance on top the total cost was £59,000. The cover turned out to be valid for only five years.
Late last year, Matthew, an engineering machinist, decided to clear his debt by remortgaging his home, but he was staggered to find that he would receive just £1,500 back in insurance premiums even though he had had the loan for only eight months. 'I was not told that the insurance would only cover me for five years or that I would get so little back if I repaid the loan early,' he says.
Matthew had to pay Conkers nearly £2,500 out of his payout of almost £12,000 - a discount on its usual fee of 25 per cent.
But he adds: 'I don't think I would have had a chance of claiming my money back without Conkers' help.' The Office of Fair Trading has referred the payment protection insurance market to the Competition Commission. The FSA has fined a number of companies.
In January, GE Capital, which sold more than 850,000 policies in 2005 alone, was hit with a £610,000 fine. A month later, lending giant Capital One was fined £175,000 for failing to give 50,000 customers sufficient information about the policies they were buying.
Others fined include mortgage company Regency and loans.co.uk.
The FSA says more fines are in the pipeline with High Street lenders expected to be next in line.
