PAC: Treasury and FCA failure on PPI mis-selling

A formal report from the Public Accounts Committe has said the Treasury and the FCA should demonstrate how they will ensure that these problems do not happen again with future schemes.

Claims management companies have taken up to £5bn out of compensation that should have gone to consumers, a report on mis-selling published by the Public Accounts Committee has found.

This is despite the fact it is straightforward and free for affected consumers to claim compensation through the Ombudsman for mis-sold payment protection insurance.

Yet in 2014–15, 80% of complaints to the Ombudsman about PPI were made through claims management companies.

The report found that in many cases, these companies merely package up payment protection insurance claims, but they typically charge between a quarter and a third of any compensation subsequently paid.

The National Audit Office estimates that claims management companies received between £3.8bn and £5bn in commission from PPI payments between April 2011 and November 2015.

The PAC concluded that collectively, the public bodies involved—the Treasury, the Ministry of Justice, the FCA and the Ombudsman—“have been too slow in taking responsibility for this situation, and too passive in allowing it to happen”.

The report said: “The problem of claims management companies taking too much of the compensation intended for victims of mis-selling was entirely predictable.

“Similar problems have harmed previous compensation schemes, for example, in 2008 the Committee of Public Accounts found that solictors and other representatives had taken almost £1.3bn out of compensation intended for former coal miners.

“The Treasury and the Ministry of Justice recently published a review of claims management regulation.

“Action now is too late but is still important, particularly as claims management activity may increase further if the FCA introduces a deadline for making PPI claims.”

The PAC called on HM Treasury and the Ministry of Justice to report publicly on the effectiveness of their actions in reducing the role of claims management companies in PPI compensation.

The report added: “The Treasury and the FCA should demonstrate how they will ensure that these problems do not happen again with future schemes.”