Payment protection insurance (PPI) compensation is nearing the £25 billion mark – that's around £500 for each UK adult, making it by far the biggest financial scam in UK history. But while the total continues to rise, the number of new cases is falling. And that is causing problems for the claims management companies which have made a fortune by grabbing up to 30% of refunds.
Where do they go from here?
Packaged accounts: the new cash cow?
Enter the mysterious “Department of Budget and Spending Analysis”. It cold calls, saying it is regulated both by the Ministry of Justice and the Financial Conduct Authority – each claim is as false as the very official sounding, but very made-up name. Instead of being a Government agency, it is a cold-calling centre linked to claims management companies who know the PPI seam has been mined almost to exhaustion.
These firms need either to find another revenue stream or close up shop. For many the answer is compensation for packaged bank accounts, where customers paid £10 to £25 a month in return for added benefits such as free travel insurance, mobile phone cover, or car breakdown assistance. Some also offered higher interest rates on savings and/or lower costs on loans.
The problem is many of these accounts were sold to those who could not use them (perhaps they did not have a car, own anything more than the most basic low cost phone or could not qualify for travel cover due to age or illness), leading to massive mis-selling. Others were signed up by their banks without a full (or any) explanation of what they were purchasing. Not for the first time, banks abused the trust of their customers.
The self-styled “Department” says there is compensation available for those wrongly sold these accounts. Describing itself as a “self-contracted company” (whatever that means) covered by both the MoJ and the FCA (a complete fabrication), it goes on to claim that the average compensation is £1,000. That sounds doubtful as the amounts in question are far lower than PPI.
Where are the calls coming from?
Anyone using 1471 or caller display will end up with a one of a wide variety of numbers. One dialling code appears to be located in the Scottish borders at Galashiels; a second at Ruthin in north Wales; other possibilities include St Albans in Hertfordshire, Pocklington in the East Riding of Yorkshire, and Carmarthen in west Wales. And there are certainly more.
In fact, the “Department” does not operate in any of these pleasant towns. It does not enjoy St Alban's cathedral or Roman theatre or the stunning Scottish/Welsh/Yorkshire countryside.
Instead, it is located in the Philippines, although it told me it was just the Philippines branch of a claims firm based in the Greater Manchester area. Others cold-called are given further explanations as it seems that the “Department” acts for a number of claims merchants. The overseas location allows it to escape what little remains of the protection against phone nuisances offered by the Telephone Preference Service. It is a rule never to trust geographic phone indicators.
I dialled the Galashiels number and spoke to someone called John. He was so surprised that I had initiated the conversation that he kept saying he had phoned me. He never questioned why I had called him – just as the vast majority of the Department's outgoing calls end up with those who cannot claim as they have never held a packaged account.
Do it yourself!
He explained that I would have to pay £250 out of the typical £1,000 compensation, but there were no upfront costs or fees. I asked him why I could not do it myself and keep all the compensation, rather than 75%.
“Yes, you could do it yourself as there are number of standard letters to copy online. It is not difficult. But it is much better to do this with a regulated company because unless the claim has a Ministry of Justice number, banks will use any amount of tricks to delay or to refuse your money. Most banks will deny your claim outright at the very first stage – some will pretend to lose your paperwork or ask detailed questions that are set deliberately so you can't answer them. Using us, however, means you will get your money within a month.”
These points are all improbable – reminiscent of Which magazine's undercover investigation in 2012 when a number of claims companies told investigators that they would obtain more compensation than if the victim tried doing it themselves.
"Not only is this likely to be untrue, it's in clear breach of the rules," said Which? at the time.
In the same year, the Advertising Standards Authority watchdog ordered a claims management company to stop showing a TV ad which exaggerated how long a self-generated PPI claim would take. The adjudication said the advertisement “exaggerated the amount of time and difficulty required by consumers to reclaim their own PPI premium”.
The Department of Budget and Spending Analysis is doing the same, spinning similar lies. But there is no UK regulator willing or even able to stop it.
If you do believe you have been mis-sold a packaged account, and your bank isn't addressing your concerns, then take your complaint to the Financial Ombudsman Service. Read How to complain to the Financial Ombudsman Service.