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Regulating Bodies


MoJ (Ministry of Justice)


An effective regulatory regime is in place to handle claims - claims business which may by its nature not lend itself to the blatant malpractice that was seen in respect of unfair terms in consumer credit agreements.

The Compensation Act 2006 provided for the regulation of claims management activities. The regulatory regime was quickly put into place by April 2007 using an innovative structure with day-to-day monitoring and compliance functions being effectively outsourced to a dedicated unit provided by a local authority. The objectives of regulation are to provide better safeguards to consumers of claims management services and to promote access to justice.

Claims management companies have played a significant role in increasing access to justice in respect of mis-sold financial services such as PPI, PBA, annuities, swaps and mortgages. Without their activities, many people would not have obtained the compensation to which they are properly entitled. Regulation has played a modest role in increasing access to justice, largely by increasing the credibility of companies in the sector and also by limiting the scope for malpractice.

There has been one consequence of the focus on consumer credit loans. Many such loans have been accompanied by payment protection insurance (PPI), a product that many argue is of questionable value. Many customers do not realise they have bought it and those that have purchased it often find that they can never claim. Reports by the Office of Fair Trading (OFT), the Competition Commission and the Financial Services Authority (FSA) demonstrated that there had been substantial mis-selling in this area, therefore offering the prospect of a market for claims management companies. However, it is difficult to find customers who have been mis-sold a product where they do not know that they have the product. Often, it was the pursuit of a consumer credit claim that led claims companies to the PPI policy that they have then pursued as a separate issue. The volume of personal PPI business has dramatically increased over the past year, the vast majority of it handled through claims management companies.

Generally, customers who buy PPI are less sophisticated and many do not realise they have bought it at all. There has been a huge increase in PPI cases going to the FOS, the best indicator of the total volume of business. It is unlikely that the majority of these cases would have been initiated without the activities of claims management companies. The proportion where a claims management company was involved has increased steadily to 74%. (CrownCopyright)

Financial Ombudsman Service (FOS)

It is the Financial Ombudsman Service job to settle individual complaints between consumers and businesses providing financial services. They look at complaints about a wide range of financial matters including PPI claims.

A factsheet that looks at the issues that most frequently crop up when consumers bring disputes to the Financial Ombudsman Service about payment protection insurance (sometimes called "PPI" or loan protection).

The Competition Commission

On 7 February 2007, the Office of Fair Trading (OFT) referred the UK supply of payment protection insurance (PPI) to non-business customers to the Competition Commission (CC) for investigation. The reference followed an initial OFT study into the sector, which was undertaken in response to a super-complaint from Citizens Advice.

The Competition Commission findings in regard to the very low average PPI payout ratios in comparison to other insurance types:

Other Interested Parties in PPI Claims Management

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