Consumers who think they have been mis-sold payment protection insurance (PPI) have been told to approach the company that sold it to them direct rather than lose out money by going through a claims management company.
It is estimated claimants could see more than £2 billion in PPI redress slip through their fingers because of fees charged by claims management firms.
With the average amount of redress awarded to successful PPI claimants being £2,750, and claims management companies taking as standard a 25% cut as their fee, Which? says a consumer could pay £825 (a fee of £687.50 plus £137.50 VAT) for something they could easily do themselves.
Furthermore, the consumer watchdog warns that people who claim back PPI sold with a loan could actually find themselves owing money to the claims management firm, even if the claim turns out to be successful.
If the loan is still being repaid, Which? points out that any redress is often simply reduced off the outstanding balance of the loan, meaning the consumer has to pay the claims firm's fee out of their own pocket.
As well as calling on consumers who think they may have been mis-sold PPI to complain to their bank themselves, the watchdog has also urged any consumer whose bank rejects their complaint to go to the free and independent Financial Ombudsman Service.
"By going to a claims management company, you'll pay what could be a lot of money for something you can easily do yourself," said Which? chief executive Peter Vicary-Smith.
"If your bank rejects your complaint, always go to the Ombudsman - most complaints about PPI are upheld in favour of the consumer."
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