Consumers can expect compensation from dodgy claims management firms in 2013 crack-down
Less stress: Legal ombudsman has 'significant powers of redress' to help protect consumers
Consumers who get ripped off by claims management companies will be able to go to the legal ombudsman and win compensation as of next year.
The number of people going to claims firms has shot up in the last couple of years, particularly following the payment protection insurance (PPI) mis-selling scandal.
But the number of dodgy firms looking to make money from the situation appears to have ballooned too, with companies often using cold-calling tactics, or sending texts and emails, to try to incite claims whether they are valid or not. Sometimes these are 'no win, no fee', but others ask for up-front payments.
Pushy companies have preyed upon a certain amount of public confusion regarding the process, when the reality is people can make claims against their banks themselves, for free.
Currently, if someone feels they have
been ripped off by a claims firm they can go to the Claims Management
Regulation Unit (CMRU), part of the Ministry of Justice, but this has no
power to compensate customers.
So after much pressure to clear up this growing problem, the legal ombudsman will - from some time in 2013, probably within the first six months - be able to chase individual cases for customers. It will aim to settle these within three months, and be able to compensate people up to £30,000 in each case. There is talk this could rise to £50,000, but that will be debated in October this year.
Chief legal ombudsman Adam Sampson
said: 'This is great news for the public and consumers as we have
significant powers of redress to help protect them.
'We are confident we can support the claims management regulator to improve standards across the industry.'
The Ministry of Justice suspended,
cancelled or warned 400 claims firms last year, with the vast majority
of complaints relating to claims management firms. Nearly 30 new
companies sprung up in the sector, taking the total to 975.
The MoJ said the 2013 change will
enable its CMRU to 'refocus its resources on working with the claims
management industry to improve standards and take wider action against
claims management companies who consistently breach the rules.'
MoJ head of claims management
regulation, Kevin Rousell, said: 'This reform is a win for consumers and
provides yet another tool to help stamp out malpractice in the
industry.
'Our CMRU will continue to target
those claims management companies who do not comply, and we will work in
partnership with the legal ombudsman to root out those that take
advantage of consumers.'
PPI was sold alongside credit cards and loans, and in many cases was mis-sold, as the consumer would never have benefited from it. As well as PPI, claims management companies also chase personal injury and industrial injury claims.
- Ten of the best used 4x4s for families from luxury badges to...
- Barclays is closing my current account after 49 years'...
- Thinking of taking out equity release? Meet the retired...
- SIMON LAMBERT: As the Government closes its pension...
- 'Stop moaning.... you're better off': Pensions Minister hits...
- I am estranged from my son from my first marriage - how can...
- The key to selling a house quickly? Tidy your garden and...
- Cost of a decent retirement to soar 150% by 2050 - but one...
- Clothes shops will charge 5p for a carrier bag from Monday...
- Almost half of young people owe money, but how can you...
- How much would it cost you to buy a home in one of the top...
- FTSE CLOSE: Footsie finishes flat as Wall Street takes a hit...