CUSTOMERS claiming compensation for mis-sold financial products such as payday loans could be set for savings of almost £10million a year under a new regulatory clampdown.
City watchdog the Financial Conduct Authority (FCA) is proposing restricting the “excessive fees” claims management companies (CMC) can take from redress they earn for customers.
A CMC can help you make a claim for compensation if you feel you have been mis-sold a product.
Most work on a no-win no-fee basis so you only have to pay if your claim is succesfull.
The CMC typically will take a portion of the compensation you receive for payment.
But these companies are often unclear about how much money they will take.
THE Financial Conduct Authority (FCA) has proposed a cap on how much claims management companies can charge.
The maximum will be between 15%-30% depending on the level of redress.
Citizens Advice claims more than half of CMCs are not upfront about their fees, while research by The Sun has found many are taking almost half the redress earned for payday loan customers.
The FCA said some consumers currently pay fees of more than 40% of the redress they receive.
Instead, it is proposing a cap so that CMCs can’t charge more than 15% to 30%, depending how much redress is due.
This will apply to all regulated financial products except payment protection insurance claims, which already have a 20% cap.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “When working well, CMCs can provide useful services for consumers.
“However, consumers can experience harm when they do not understand the nature of the service CMCs provide and where they are charged excessive fees.
“We estimate that the proposed cap on fees could save consumers around £9.6m a year.”
The consultation closes on April 21.
You don’t have to use a CMC to make a complaint.
Instead, you can complain and seek redress for free if you feel you have been mis-sold a regulated financial product.
First you can complain to your provider who must respond within eight weeks.
You can only complain about products such as a loan taken out in the previous six years.
If you are unhappy with the response, you can make a complaint for free to the Financial Ombudsman Service (FOS) within six months.
The FOS will consider both sides of the complaint and will come up with a conclusion, which may include compensation if your issue is upheld.
There is no charge whether you win or lose.
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