What next for claims management firms after the demise of PPI?

Merryn Somerset Webb looks at the areas the claims management firms could turn their attention to now that PPI claims can no longer be made.

Piles of cash © Getty Images

So long PPI payments. The end of August saw a huge surge in deadline-defying claims for compensation for mis-sold payment protection insurance RBS saw 200,000 claims come in on 29 August alone. The total bill for the bad banks involved? Somewhere in the region of £50bn (about £750 for every single member of the UK population).

That is real money. So much so that it has acted a bit like a kind of people's QE: the money has poured into the bank accounts of ordinary people and they have gone out and spent it (mostly on cars it seems) to the extent, says the FT, that "Barclays former chairman John MacFarlane once accused the government of encouraging the culture of finagling financial handouts to boost the economy."

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Either way, the economy is going to miss the cash transfer from the banking sector to the retail sector and so, of course, are the claims management firms, which have made genuine fortunes for their founders over the last decade and jobs for 20,000 odd people.

So what next? The claims management firms are hardly likely to shut up shop and disappear. They are, one person "familiar with the sector" told The Times, "entrepreneurial people and they are looking for news businesses." Good news then, (or bad depends how you look at it) that there are a number of ideas out there for them to play with.

Advertisement
Advertisement - Article continues below

First up is packaged bank accounts the ones you pay £10-£25 a month for in exchange for a variety of benefits such as travel insurance and car breakdown cover. This can work brilliantly if the benefits work as promised and if you actually use them. However, target-driven sales pressure inside banks has long meant that lots of people have been paying for accounts and benefits that are of no obvious use to them. If that's you, you might have a claim.

More niche but still in the mix is pension transfer advice the goodies on offer as a result of pension freedoms have prompted various levels of unethical behaviour across the financial industry. This, says the Telegraph, could be a "gold mine for mis-selling."

Then there is Guaranteed Asset Protection (GAP insurance), which is sold as a way to protect yourself against any difference between the price you have paid for a car and what your regular insurance company might pay you if it is written off something pretty vital if you hold debt against your car, for example. There may well be incidents of mis-selling here ( the FCA notes that 59% of those who have bought it had not considered that they needed it before the day of their car purchase, suggesting, says the Telegraph, "that it was sold to them.")

I'd also add solar panels to the list the Financial Ombudsman has already received 2,000 complaints about the financial rewards being rather less than promised and Barclays has, says the Mail, "put aside millions to compensate those who took on costly loans to pay for mis sold panels".

Payday loans could be another fruitful area, as could the wider investment advice sector. But here's another area that might be quite interesting: property mismeasurement.

Most people buying a house or flat will want to know its precise size in square metres this is the best way to see what kind of relative value you are getting in any one area. Yet according to Spec (which calls itself "the UK's only fully-verified, millimetre-accurate property measurement solution") property measurement in London is so badly done (often by untrained photographers that "properties have been mis-sold by an average of £33,800." Spec's outrage at this clearly comes under the heading of "well they would, wouldn't they." But actually this is serious stuff. Think of the cost of a square foot of central London (about £2,000). Now imagine that your flat is, say, eight square feet smaller than you thought it as when you bought it. You'd want compensation wouldn't you? You know who to call.

Advertisement

Recommended

Visit/personal-finance/601104/fca-proposes-credit-card-payment-freeze-and-ps500-overdraft-for-all
Personal finance

FCA proposes credit-card payment freeze and £500 overdraft for all

The Financial Conduct Authority has said that loan and credit card repayments could be frozen for three months, while those affected financially by th…
2 Apr 2020
Visit/personal-finance/601053/coronavirus-how-to-get-your-money-back-if-your-holiday-is-cancelled
Personal finance

Coronavirus: how to get your money back if your holiday is cancelled

Have you had an upcoming holiday cancelled because of coronavirus? Ruth Jackson-Kirby explains how to get your cash back.
1 Apr 2020
Visit/economy/small-business/601073/furlough-what-does-it-mean-and-how-does-it-affect-me
Small business

Furlough: what does it mean and how does it affect me?

Many companies have “furloughed” employees after they have shut down because of the coronavirus. But what does furlough mean and how does the scheme w…
30 Mar 2020
Visit/personal-finance/mortgages/601045/coronavirus-what-it-means-for-your-mortgage-or-your-rent
Mortgages

Coronavirus: what it means for your mortgage or your rent

Ruth Jackson-Kirby looks at all the key questions for owners, renters and landlords affected by the coronavirus crisis.
29 Mar 2020

Most Popular

Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/economy/small-business/601073/furlough-what-does-it-mean-and-how-does-it-affect-me
Small business

Furlough: what does it mean and how does it affect me?

Many companies have “furloughed” employees after they have shut down because of the coronavirus. But what does furlough mean and how does the scheme w…
30 Mar 2020
Visit/investments/stockmarkets/601068/buy-stocks-for-the-long-term-but-buy-very-carefully
Stockmarkets

Buy stocks for the long term, but buy very carefully

After the wild ride of the last couple of weeks, equities are no longer expensive. But if you do decide to buy, be very, very careful indeed, says Mer…
30 Mar 2020