The Ministry of Justice is launching a crackdown on unscrupulous claims firms targeting payment protection insurance misselling claims.
The department has set up a specialist unit to investigate PPI misselling claims firms and agreed memorandums of understanding with the FSA, Financial Services Compensation Scheme and Financial Ombudsman Service to share information and work more closely.
It has also developed a reporting template for use by credit card companies, banks and building societies to facilitate the exchange of information about businesses’ activities.
In its claims management regulation annual report for 2011/12, the MoJ says it made 150 audits and visits to firms and 409 have been warned, suspended or seen their authorisation cancelled.
MoJ head of claims management Kevin Roussell says: “The mass misselling of PPI has seen a surge in the number of companies operating in the financial claims management sector. Poor practice is rife among some claims management companies that are falling over each other to get claimants’ business.”
The number of claims firms targeting financial services grew from 946 in March 2011 to 975 in March this year.
Which? executive director Richard Lloyd says: “We need to see real action from the Government to speed up the tougher regulation of claims management companies so that people who have genuine claims do not get robbed twice.”
The MoJ is also warning that claims firms are targeting mortgages, unenforceable consumer credit agreements and missold investments as they seek to exploit new areas.
The MoJ received 8,521 consumer complaints relating to financial services claims firms in the year to March, which accounted for 93 per cent of all complaints, despite only making up 17 per cent of firms.
It has also received more than 1,000 complaints from financial services companies about claims management firms.