MoJ closes 103 PPI claims management companies
Some CMCs fail to establish whether consumers had PPI or were clients
The MoJ's Claims Management Unit has announced that it has banned 103 PPI claims management companies (CMCs) from business in the last year.
A further 149 have been warned for poor practice by the unit's PPI compliance team, which was set in November 2011.
In a report on its progress since then, the compliance team said a number of CMCs 'failed to establish if the consumer had PPI or was actually a client of the financial institution'.
The unit said the reasons for this were usually that they failed to obtain enough information from the client, encouraged them to complain 'without due cause' and carried out 'phishing exercises' on raw data purchased from unreliable sources.
A further problem was that allegations were based on standard information where the client was 'unsure' about the existence of PPI on their loan, mortgage or credit card.
The PPI compliance team said unsolicited text messages were 'generally not sent by CMCs but by others to generate 'leads' for other businesses'. The team noted that the Information Commissioner's Office had fined two owners of a marketing company which sent millions of unlawful spam texts a total of £440,000 and was considering imposing similar penalties on three other companies.
'The mass mis-selling of PPI has seen complaints against claims management companies soar,' Kevin Roussel (pictured), head of claims management regulation at the MoJ said.
'As this report shows, we won't tolerate firms that break the rules and we have shut down or warned more than 252 companies dealing with PPI claims in the past year.
'As part of our continued crackdown we are expanding our compliance work to ensure even more rogue companies clean up their acts or face closure.
'We would advise consumers to consider whether they need to use a claims management company to make their claim. Companies can help them - but they may well be able to make the claim on their own.'
The MoJ says there are currently around 1,100 authorised CMCs operating in the PPI market, which account for the 'vast majority of consumer and non-consumer complaints' received.