Beware no-win no-fee companies

British consumers could be in line for compensation payments totalling £9 billion after banks pulled out of the appeal to overturn the High Court ruling on the mis-selling of payment protection insurance - but it isn’t just victims who will be trying to get a share.

Plenty of companies are looking to make money from those mis-sold PPI by offering ‘no-win no-fee’ claims management services, but anyone using these services could stand to lose a large percentage of any payout.

The number of companies offering this sort of service has almost doubled over the past year and industry experts fear that there could be an even more introduced now that the banking industry has conceded defeat over the mis-selling of PPI.

Here, we explain why you don’t need the ‘help’ no-win no-fee companies will be offering and show how you can make your own claim and keep 100% of any compensation you receive.

What is the problem with ‘no-win no-fee’ claims services?

Over 80% of PPI claims are filed by claims management firms and many of these companies offer a ‘no-win, no-fee’ service, which means that, should they take a case on, they will take no payment unless the claim is successful.

However, most companies will take a cut of around 25%, plus VAT, from any successful compensation claim whilst some will charge an additional fee up-front for taking on a case.

This can lead to an unexpected loss in compensation and is something that has been identified by the Ministry of Justice which has shut down close to 500 claims management firms that have used misleading advertising or have charged excessive fees.

How can I be sure I have been mis-sold PPI?

PPI is nothing more than a standard insurance product designed to protect both lenders and borrowers against missed repayments through illness or unemployment.

As a product there is nothing inherently wrong with PPI and it is generally offered to anyone taking out a loan or credit card in much the same way that breakdown cover is offered to anyone taking out car insurance.

However, many of these policies were sold in the past without being properly explained to consumers, or they were sold to people who wouldn’t be eligible to make a claim, for example, because they were self-employed.
In some cases, the cost of PPI was automatically added to the overall cost of the loan or credit agreement without the consent or knowledge of the customer.

If you think that you have been mis-sold PPI then the first thing you should do is check your policy as it is often easier to claim if you took out your insurance in the last six years.

However, it is still worth claiming if your policy is older than this and even if you have made a successful claim on the insurance.

You then need to make a case for having been mis-sold insurance, for example, you can claim if you did not realise that you had cover or the lender insisted that it was compulsory or failed to inform you of a cooling-off period.

Furthermore, if you were retired, unemployed, self-employed or had any medical problems when you took out the policy then you could have a case for a claim as each of these factors may render your policy invalid.

How can I make a claim?

Once you feel sure that you have a case then you need to write to your lender or the company that provided the insurance outlining your complaint and wait for their response.

If, after eight weeks, you have still no received a response, or you aren’t satisfied with the answer you’ve been given, then you should file a formal complaint to the Financial Ombudsman Service. This is an official independent service ordered with settling disputes between financial companies and customers.

The Ombudsman service is completely free of charge and they will make a decision as to whether or not your claim should be paid out but remember that it can only do this if you have waited over eight weeks for a decision from your lender.

You can make a complaint to the Financial Ombudsman via their website or you can get further advice on this matter from Citizens’ Advice.

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