With news this week that 7 out of ten complaints to the Financial Ombudsman Service in the past year were in relation to mis-selling of PPI policies, a rise of 113% year on year, debt solutions provider and DEMSA member, Atlantic Financial Management, is calling for clarity on compensation payouts estimated to be in the region of £9 billion.
Kevin Still, Director, said:
“The potential compensation is great news for the millions of individuals who have been mis-sold PPI policies by their lenders. However it is vital we set robust processes in place to protect the interests of those people currently in Debt Management Plans or who are in an IVA.
“The first priority is to ensure is that creditors notify legitimate Debt Solution providers of any balance reduction following a successful PPI reclaim so that this can be reflected in the schedule of pro-rata payments.
“We also need to consider the numerous cases where a loan is paid off by the compensation payout but a new debt may be created because the debtor is unable to pay a Claims Management Company’s contingency fee for the settlement.
"It’s a sad fact that this can happen in some instances, as reflected in the recent Ombudsman news bulletin and on the Financial Service Compensation Scheme website.
“There is also the issue of when compensation is paid direct to the debtor, bypassing a CMC, and which could be used to help reduce their debt burden. Temptation can be a problem and the funds can be quickly spent on non-priority items.
“Finally, there’s a whole set of questions around whether a sold debt would be bought back by the creditor when a claim is settled, which is subject of much debate in the debt sale and purchase market at present.
"With the new OFT Debt Collection Guidance currently being consulted upon, there is an opportunity to bring greater clarification and improved practices around the selling and buying of debt.
“What is very clear is that as an industry, there are numerous nettles we need to grasp and we need to do it quickly.
“As Kevin Roussell, The Head of Claims Management at the MOJ has said as part of its Annual Report on PPI reclaims and CMCs, the industry needs to sort out “the good, the bad and the illegal”.
It is certainly good to see that that Claims Management Regulation Unit is working to drive out the malpractice in the claims management industry and those specialising in Payment Protection Insurance claims, increasing consumer confidence in the reputable and licensed businesses in this sector.”
