Consumers mis-sold PPI can claim back the money themselves for free however many use CMCs, which take a cut, because they don’t know how to claim back from providers themselves.
An estimated 800 CMCs have been set up to take a cut of the 25% plus VAT or more from the average £3,000 payout.
Only half of people knew that using a CMC would be no more successful than making the claim themselves.
Over half of people who have used a CMC to get back mis-sold PPI said they’d be unlikely to use one again. The biggest complaint was about value for money with 37% of consumers unhappy on this front.
CMCs spend an estimated £2m a month of advertising, £1.6m of which is on television advertising.
The result is that 93% of people had seen or heard adverts about claiming back PPI with 88% of people seeing television adverts.
About 65% of people said they’d received phone calls from claims companies about PPI. Around 55% had received text messages and 54% had received letters.
The findings come ahead of a major PPI summit being held today with all major banks and credit card providers, regulators and the Financial Ombudsman Service.
The aim of the summit is to get all parties working together to help people get back the money they are owed and help to improve the PPI claims process.
A separate meeting with representatives of CMCs will follow.
Martin Lewis, founder or MoneySavingExpert, said: “Sadly PPI has become a cash bonanza for unscrupulous claims companies who, through a series of lies and misdirection, are persuading people they are the only option for getting their PPI money back. Even I’ve been texted to be told I’m owed £3,000 PPI – though I’ve never had the product.
“If people make a rational decision to give a huge 30% of what they’re due to a claims handling company in full knowledge they could do it themselves – I’ve no problem.
“Yet sadly very few are in that position. Many are persuaded under false pretences and the dire lack of regulation means it’s tough to tell legit firms from the rest.
“And worse, if things do go wrong with claims companies, it’s a nightmare to get any redress. This is a billion pound plus industry – it’s too big to be left alone.”
Richard Lloyd, executive director, Which?, said: “This new research shows that many people don’t realise there are simple, easy to follow steps to reclaim their money for free and so they’re turning to claims management companies, too often unaware they charge a fee.
“It's encouraging that the banks are going to work with us to help put this situation right and help their consumers reclaim mis-sold PPI. It needs to be as easy as possible for people to get back their money.
“Many people have told us that free online claims forms, letter templates and help lines would help them to make a claim themselves, so we want to see action.”
Banks paid out £1.9bn to the victims of mis-sold PPI last year with many thousands of people having succesffuly applied for compensation.
Banks are now writing to millions of people who may have been mis-sold PPI but have yet to lodge a complaint, with another £5bn still expected to be paid out.
