In its mystery shopping exercise, one of the consumer watchdog’s staff members posed as a customer who thought they had been mis-sold payment protection insurance.
Out of the 25 CMCs contacted, Which? found that the majority had failed to comply with the rules set out by the Ministry of Justice (MoJ).
Two thirds failed to advise the caller about the Financial Ombudsman Service, which they are required to do, while one company told the caller that there was nothing they could do if the bank rejected its claim.
Six companies repeatedly told the caller they had more chance of success or would receive more compensation using a CMC than by submitting a claim independently.
Three of the firms, Aims Review, WeFightAnyClaim and Tucan Claims, charged upfront fees, and some asked callers for payment over the phone.
“Claims management companies must clean up their act,” said Richard Lloyd, executive director of Which?.
“All too often, consumers are being misled about their chances of success and how much they’ll have to pay, which is the last thing people need if they’ve already fallen victim to the PPI mis-selling scandal.”
According to the MoJ, most claims businesses only charge at the end and only if a claim is successful.
Robert Sinclair, director of the Association of Mortgage Intermediaries (AMI), said: “I find that some of the assertions made by CMCs, which the Which? report has shown, to be wholly unjustified and there are even those who want to take an upfront fee to try and justify some of the things they’re doing. That cannot be right in any world I understand.”
A spokesperson for the Ministry of Justice, added: “We have made it very clear to businesses that we take a zero tolerance approach to any malpractice or attempts to take advantage of consumers. Claims management companies should remain in no doubt that if they breach the rules they will be closed down.”
