In its latest newsletter, the FOS said 45% of complaints received last year were from CMCs.
Caroline Wayman, principal ombudsman and legal director at the FOS, said CMCs could seem “attractive and reassuring” but insisted consumers did not need to go through third parties to make claims.
She said: “The ‘PPI problem’ stems from very large numbers of PPI policies being sold inappropriately by financial businesses – so CMCs didn’t create the problem.
“But they’ve certainly exploited it – and this has had a major impact on PPI complaints.”
She said some she has some seen CMCs fail “pretty dismally” in their job of representing consumers professionally, or have provided a service of very doubtful value.
PPI policies were largely sold to consumers who took out loans to insure against a change in income which meant they could no longer meet the loan repayments.
In one case seen by FOS, a consumer’s PPI complaint was upheld after going through a CMC, and the firm then offered to reduce the balance on her loan by £10,200 and give her a cash payment of £2,100.
However, the CMC’s bill would have been £3,690, meaning she would have to use the entire £2,100 cash payment and probably take out a £1,590 loan to meet the cost.
The FOS told her to contact a free local law centre to get a view about the contract as it could not deal with complaints about CMC.
After a number of consumers complained about the fees of this particular CMC, the FOS said it has highlighted the issue with the Ministry of Justice.
