During the start of the PPI claims scandal, unscrupulous claims management companies (CMCs) have been behind every unsolicited text message to help customers make a claim for the mis-sold insurance. Most without intimate links to banks had used “brute force,” using customer names and passing them into a bank’s claims system, to see whether these individuals had a mis-sold PPI.
Banks blame CMCs for their inflated administration costs. They claim it had drastically contributed to helping the industry reach more than £40 billion in collective refunds. Today, the Financial Conduct Authority (FCA) imposes a regulatory rule against CMCs.
The FCA will now take over the Claims Management Regulator and include CMCs from Scotland as well. It is the City watchdog’s follow-through to its 2016 proposition to have CMCs under a “tough accountability regime.”
The organisation plans to hold senior managers accountable for any failures on their watch. They will earn penalties and fines in the process.
Three years after PPI mis-selling reached its peak in 2012, CMCs profited as much as £5 billion from the £22.2 billion that banks set aside for payment protection insurance repayments. Politicians also blame CMCs for encouraging a “compensation culture” in the country.
Near the end of PPI claims, banks are preparing to handle hundreds of thousands of consumer complaints for 2019.