Kamran Mirshahi, director of Canary Claims, discusses the latest changes in the PPI claims market. What does it mean for these companies and other businesses offering financial services?
Earlier this month, the government introduced a fee cap for all PPI claims companies. These companies now cannot charge more than 24% (inclusive of VAT) for their services. This has caused a big shake-up in the claims management market as many companies were, for a long time, charging more than this amount.
The fee is intended to benefit consumers, as many were left giving nearly 40% of their successful refund to the company that acted on their behalf. Reputable claims companies, such as Canary Claims, were charging well below this mark before the fee cap.
The impact this will have on the industry is not yet known, but it’s thought that some companies will fold as they struggle to stay afloat in an increasingly competitive market.
This change could also fare as a warning to other companies which are under scrutiny for their high charges, such as letting agents.
Changes to PPI Claims Company Regulations
The fee cap isn’t the only shake-up in the PPI claims market. As of April 2019, the Financial Conduct Authority (FCA) is taking over regulation of all claims companies. The role of the FCA is to protect consumers using financial services in the U.K. It regulates companies and ensures they comply with strict guidelines.
All claims management companies currently operating will need to complete registration and apply for authorisation before the end of March 2019.
Many small businesses starting out in the financial service sector are regulated by the FCA. Fees are paid to the FCA and the company is listed on the Financial Services Register, promoting transparency and making it easy for customers to look up reputable firms.
A Busy Time for Claims Companies
If the fee cap and regulations weren’t enough for most companies to handle, there is also the mounting pressure of the PPI deadline getting ever closer.
The Financial Conduct Authority set the deadline to encourage those who have not yet made a PPI claim to do so. With the deadline set for 29th August 2019, consumers have little over a year left to process their claims. But with over £30 billion already paid to consumers, it’s a worthwhile claim to make.
The deadline is keeping claims companies busier than ever, as we strive to process as many claims as possible and help consumers to reclaim their deserved money.
The combination of new regulations and an imposed fee cap could have a dramatic effect on many companies. Some of these businesses may swap to a different industry or offer a wider selection of claims services to compensate for charging lower fees.
Succeeding as a Financial Service
As smaller companies are weaned out of the claims management market, those of us left will face tougher competition. Keeping customers happy and providing the very best service is key to standing out in the market.
Of course, claims management companies which also offer a competitive price benefit. Having a low fee before the fee cap was introduced has put us at an advantage, as we have not had to adjust our financial projections. A lower fee has also allowed us to build trust with consumers. Charging a fair price to consumers for the services you offer can go a long way in helping your business succeed.
Any business wanting to start in the financial service sector will need to adhere to FCA regulation and ensure that their actions are always in the best interest of the customer.