Claims management firms are now handling more than three quarters of compensation claims for victims of mis-sold Payment Protection Insurance (PPI), figures have revealed.
The number of individual claims made to the Financial Services Compensation Scheme (FSCS) by these firms – which typically take a cut of 25% or more of the total compensation – has also risen by more than three to one since 2010.
This rise comes despite evidence suggesting compensation claims made by claims management firms have a similar success rate to claims made by individuals.
However, the FSCS did disclose that uphold rate for claims made through third parties is just under 87%, compared with just over 83% for individuals.
The FSCS said it had received more than double the number of claims for PPI compensation from 2010 to 2011, with the average pay-out to those going via a claims management company hitting £4,534, of which a 25% cut is more than £1,133.
The total number of PPI claims for failed institutions has also rocketed in the past year, with 60% more people claiming compensation in 2011 compared to 2010.
Mark Neale, chief executive of FSCS, said: “Claims management companies take a sizeable part of the possible pay-out and are no more likely to make a successful claim than consumers can on their own.
“Each application is judged on its individual merits. Whether it is submitted by a claims management company or by an individual has no bearing on the likelihood of success. If people make the claim directly and it is successful, they receive the full payment, without having to share a big cut with a third party.”
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