Claims management firms swipe around 25% of a settlement – an average £4,534 from each pay out – for filling in a few forms with information supplied by consumers.
The government’s Financial Services Compensation Scheme (FSCS) reckons 16,500 PPI claims will fly in to banks and building societies this year, and most consumers would be better off making a DIY application.
Research by the FSCS showed 75% of consumers make a PPI misselling claim through a law firm – generally in response to a phone call, email or letter.
FSCS runs a free claim scheme that has helped thousands of consumers win £77.5 million in pay outs for wrongly sold PPI.
FSCS chief executive Mark Neale said: “The significant uplift in PPI claims shows no sign of slowing down. The amount consumers pay to claims management companies for handling their case is sizeable.
“Claims management companies take a significant part of the possible pay-out and are no more likely to make a successful claim than consumers can on their own. People can save thousands by submitting their claims directly to the FSCS, rather than through a third party.
“While it may seem reassuring to have someone else do the paperwork, consumers should not be daunted by the process of making a claim. Claiming compensation from the FSCS is free and simple. If consumers have any concerns there is always someone on hand to help.”
High street banks and building societies have set aside around £13.5 billion for compensating consumers who were missold payment protection insurance.
The cover was aimed to safeguard mortgage or loan repayments for the policy holder if they could not work due to illness or injury.
The reality was many consumers could never hope to claim on their policies because they flouted exclusions when they took out PPI insurance.