CCR2 Technology
Time for change
PPI claims companies are looking for a new target and action needs to be taken now to avoid a new mountain of vexatious claims
David Wylie Director, LendingMetrics
Claims-management companies have been casting around for new income streams now that the door has shut on PPI. It has been really good to them. Some
£39bn has been handed out to consumers, of which the claims companies have kept up to 30%. Pundits reckon that the full cost of PPI will come in at nearer £50bn – or five times the cost of the London Olympics. That is 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. It has to be said, undoubtedly, there were
an awful lot of genuinely mis-sold PPI policies out there at the start of the process. 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 proportion of claims that have been 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 forwarded
to the Financial Ombudsman Service cost the lender a standard £550 fee, plus the considerable manpower cost involved in processing, so they 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 regulator. 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.
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
These self same claims companies that
have spent the past 10 years perfecting the art of securing 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 e-mails 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. And they do not have far to look, given
that the PPI forms they have asked consumers to complete also had sections requesting details of all loans taken out. The modus operandi of claims companies
mean we can expect the same carpet bombing of daytime TV adverts that there was in PPI, but this time suggesting to consumers they would be mad not to make a claim against the provider of their consumer loan, credit card, investment, and so on. For companies such as those whose
lending book consists substantially of smaller loans of under £1,000 this scenario could be disastrous. I spoke to a medium-sized unsecured lender last month who told me claims were already costing him £30,000 a
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www.CCRMagazine.com January 2020
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