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

Where will the next cash windfall come from?

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."

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.

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.

Recommended

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in
Investment strategy

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in

Many people scoff at cryptocurrency speculators pouring money into an asset they may barely understand. But the same could be said of investors in man…
26 Jan 2022
Shareholder capitalism: the world’s most powerful asset manager wants you to have your say
ESG investing

Shareholder capitalism: the world’s most powerful asset manager wants you to have your say

Under shareholder capitalism, the owners of the companies the big fund managers invest in are us – yet our voice is rarely heard. Now one asset manage…
26 Jan 2022
Tax return deadline extended – but don't forget to file
Income tax

Tax return deadline extended – but don't forget to file

HMRC is being slightly more lenient about tax returns this year, but falling behind will still incur hefty fines.
25 Jan 2022
Tech stock carnage: do you think Apple, Amazon and Alphabet will save you? Think again
Tech stocks

Tech stock carnage: do you think Apple, Amazon and Alphabet will save you? Think again

As tech stocks continued to slide, there is a view that you can escape all the carnage by holding really high quality profitable stocks. That view is …
24 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Amazon halts plans to ban UK Visa credit card payments
Personal finance

Amazon halts plans to ban UK Visa credit card payments

Amazon has said that it is to shelve its proposed ban on UK customers making payments with Visa credit cards.
17 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022