In the summer budget of 2015, George Osborne first announced that a fee cap for claims management companies (CMCs) would be discussed. In November 2017, proposals were made that a 20% +VAT fee cap should be introduced for claims companies. This is in addition to other regulations about upfront fees and cancellations.
With the upcoming PPI deadline being heavily promoted by the Financial Conduct Authority (FCA), claims management companies are hoping to make as many claims as possible before August 2019. The introduction of a fee cap could have a dramatic effect on the profitability of CMCs.
Some companies charge well above the proposed fee cap, taking nearly 40% from successful claims. Cutting this by 50% could put a lot of these businesses in danger.
When Will the Fee Cap Come into Place?
The decision about the fee cap will be confirmed after the bill receives Royal Assent, which is expected in March. However, other regulations for CMCs are starting on 1st April 2018. These new regulations include:
- No upfront fees to clients
- If the client wishes to cancel, charges will be sent to the client with an itemised bill
- If the claim is unsuccessful, the client will not have to pay any charges
Many PPI claims companies already adhere to these regulations. But, for those charging extra fees and not being upfront with customers, the regulations will have a knock-on effect.
What Will Happen to PPI Claims Companies?
Some claims management firms believe that the fee cap will “destroy the CMC market” and cause significant losses to businesses. Many employees will lose their jobs and claims companies argue that it would be detrimental to consumers wanting to make claims.
The loss in profits could wean out the less reputable claims companies. This is excellent news for customers wanting to make claims using a trustworthy company.
However, some claims companies have been offering a low fee and no win, no fee service for a number of years. These companies will not face any changes when the new regulations come in, although they may see higher competition as other CMCs lower their fees.
Finding the Best PPI Company
’s possible to make a claim yourself via the bank or lender, many consumers prefer to use a claims company to make a claim on their behalf. A claims company will deal with all the communication from the bank and will discover if PPI was added to a product. Lenders that are no longer in business, such as Bradford & Bingley or Egg, can be difficult to contact. A claims company is a very appealing option if people aren’t sure who to contact for these banks.
Due to the deadline, consumers shouldn’t wait for the fee cap before making a claim. The best PPI claims companies are already offering fees below the 20% regulation. If customers decide to use a claims company, these are the ones they should be going for. When the fee cap comes into place, those claims companies who need to cut costs could struggle with claims.
When the fee cap comes into place later this year, only time will tell what will happen to the claims management companies. Those already offering a low fee will be the winners. Those with high charges, however, may be in financial trouble.