Dodgy claim firms are making more than three times as many bogus mis-sold payment protection insurance (PPI) claims to building societies, the societies' trade body says.
The Building Societies Association (BSA) wants the Ministry of Justice to be given stronger powers over the claims industry.
This adds to calls from MoneySavingExpert.com and consumer lobby group Which? to properly regulate fee-charging firms.
We joined forces in April to increase awareness of how easy it is for consumers to reclaim mis-sold PPI for free.
One key problem genuine mis-selling victims face is false claims slowing down their compensation claims.
Bogus claims to societies, often where the claimant never even had PPI, in the six months to the end of April, were up by a whopping 247% on the previous six months, the BSA says.
This is despite the Ministry of Justice warning basic checks must be made before a claim is lodged.
Claims firms often bombard consumers with texts, calls and emails urging them to reclaim. As these are sent to thousands of randomly-picked addresses or numbers in one go, many recipients will have never had PPI.
Yet claims firms often charge 30% of the compensation, which is £825 on a typical £2,750 payout. You can easily claim for free yourself.
MoneySavingExpert.com creator Martin Lewis says: "Claims companies operate in a wild west devoid of any effective regulation and with no redress for customers when things go wrong, barring taking them to court.
"This has to end. We're talking to the Ministry of Justice about toughening this up and trying to ensure real regulation. Yet for most people the golden rule is do not pay to reclaim, do it yourself for free, then you can keep all of your cash."
The BSA says it has seen increasing evidence of pressure-selling tactics by some firms, sometimes on doorsteps and particularly directed towards elderly or vulnerable consumers.
It wants, amongst other things:
- The Ministry of Justice to be given the power to fine claims firms.
- Consumers to be provided with a powerful ombudsman scheme so that they can complain effectively about claims firms.
- Companies to pay a fee to the Ombudsman in cases where their claim is bogus.
PPI has become a lucrative business for claims firms, with an estimated £9 billion owed to consumers since banks lost a crucial legal case last year.
Only £4 billion of this has been paid back, according to the most recent figures.
Last month, nine banking giants agreed to make it easier for consumers to find out how to reclaim mis-sold PPI (see the PPI MSE News story).