PPI - The end of an era

The PPI era is ending but it shows that responsible claims management companies have
an important role to play, says Matthew Maxwell Scott, Executive Director of the
Association of Consumer Support Organisations (ACSO)


It’s an historic week for the claimant sector – or at least one part of it. Since 2011,
consumers have been able to seek compensation for being sold the most complained-about financial services product in UK history. Millions of us have successfully claimed that we were mis-sold payment protection insurance (PPI), which for years was added to loans,
credit cards and other products, often without people realising it.


The result has been an extraordinary £36bn paid back so far, a boost to many households as well as to the economy as a whole (unless you’re a bank). On 29 August it comes to an end as the deadline for making PPI claims passes.


This period has been notable for a number of reasons. First, and this is something we should never lose sight of, a great wrong has been righted. I worked in consumer finance PR for a while in the early noughties (we all have a past) and it was well known that PPI was largely a con that financial services providers kept peddling because it made them a lot of money. Justice was done following a super complaint by the Office of Fair Trading and Citizens Advice. This led to a surge in claims numbers, driven also by the rapid growth of claims management companies (CMCs) set up to help consumers receive their compensation, in exchange for a fee.


It’s of no doubt that there has been huge consumer benefit. The £36bn is not a windfall but a repayment, with interest rightly added on top. Further, it has shown financial services providers and their customers that poor behaviour and substandard products should not be tolerated.


But there has been consumer detriment too, not least because of the abuse of our data. Billions of phone calls and texts, often from abroad, have been a source of irritation to pretty much all of us. Granted, these marketing techniques are not unique but the scale of their use here has been striking. Equally, some argue that as claims can be made without the support of a CMC (and therefore without paying a fee) that all this was unnecessary. But as the FCA itself recognises, about two thirds of the complaints about PPI would not have been raised had CMCs not existed. They have raised awareness and many consumers have chosen to use them because of understandable concerns about going head to head with banking behemoths, and because they want both support and simplicity. Filling in forms isn’t fun for most of us, but for some it is a source of deep anxiety or even, because of literacy issues, an impossibility.


The poor behaviour of some CMCs might have been prevented with better regulatory oversight. There seems little doubt that this would have been beefed up sooner if the government had appreciated the scale of the mis-selling and therefore how big an industry this would create as word got around that compensation was available. Perhaps belatedly, responsibility for the sector moved from the Ministry of Justice’s Claims Management Regulator to the Financial Conduct Authority (FCA), a body with rather more teeth – and the appetite to use them.


As Thursday comes and goes, the FCA will have rather less to do when it comes to PPI. But it now also has responsibility for regulating CMCs who help consumers make personal injury claims. While not on the scale of PPI, a lot of people still depend on the support they
provide. Around a million personal injury claims of one sort or another were made last year as a result of road traffic collisions or negligence at work, in public places or as a result of poor medical treatment.


Complaints about the CMCs who operate in this area are miniscule in comparison to those dealing with PPI, yet the regulatory burden they face is considerable. It needs to be proportionate or – just as with PPI – many who have been wronged may be unable to receive the redress they are entitled to under the law. Well-managed and well-regulated CMCs have an important role to play in helping deliver justice, and in providing people with choice – which is also a powerful weapon in driving up quality of service.


If claims companies are behaving in a responsible way, with consumer-friendly explanations as to what is being done, why – and at what cost – then clearly that is acceptable. Those of us who work with reputable CMCs need to continue to make this case. As the PPI experience shows, there is a considerable benefit to the consumer which might otherwise be lost.