Consumers are using mortgage endowment claims companies to save time and help them through what they see as a complex process, according to the latest research from the Financial Services Consumer Panel.
It says two thirds of successful claimants also say they have received value for money from mortgage endowment claims firms, dsspite firms typically charging a fee of between 20% and 30% of the compensation recovered.
And just under half of those whose claims were successful, and a quarter of those who were unsuccessful, said they would definitely recommend the services of a mortgage endowment claims firm.
Three quarters of those questioned said they went to a mortgage endowment claims company because they read about it or heard about it from an independent source – only one in ten were prompted by the claims company itself.
Meanwhile, the Consumer Panel says those who have used the claim companies say they understood that it was a no win – no fee system, but the fee level was not always made clear.
There was also evidence endowment claims companies are selective in the choice of who to represent and that such firms were likely to act for individuals where there was a good chance of success.
And there was criticism that companies ceased to communicate with clients if they felt the claim was unlikely to be successful.
John Howard, chairman of the Financial Services Consumer Panel says: “Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves.
“It is not clear the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms – not giving details about the fees up front, and poor service in telling clients when the claim was not successful. This needs to be considered as the government starts to regulate this arena through the Department of Constitutional Affairs."
The new rules announced by the Department for Constitutional Affairs (DCA) will clamp down on claims management companies chasing financial mis-selling claims commercial law firm Reynolds Porter Chamberlain LLP (RPC)says.
From April next year claims management companies which advise clients on mis-selling claims will have to inform their client about the free route to settling mis-selling claims available through the Financial Ombudsman Service (FOS).
Claims managers will also be forbidden from suggesting that claimants will do better using the services of the claims manager rather than the FOS.
Jonathan Davies, partner of RPC says: "The FOS should make claims managers redundant. The FOS route is free and designed to be used by consumers without the need for legal or other professional advice. "FOS statistics also show that consumers who have used claims managers have had no better a success record in front of the FOS than consumers who take claims to the FOS unassisted."
The new DCA rules will also require claims managers to make clear, in writing, the charge they will make, including an example of the actual cost in pounds, not just a percentage.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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