PPI Claims Regulation

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Claiming back mis-sold PPI is a growing industry. An estimated 20 million payment protection insurance policies have been sold in the United Kingdom, and with many sold to customers who did not want or need the cover, increasing numbers of people have been making a PPI complaint and, in many cases, subsequently receiving a PPI refund letter.

As more and more people make use of claims management companies for assistance in how to claim back PPI, the industry's own standards are coming under closer scrutiny. It is estimated there are 800 such companies engaged in PPI reclaim.

Claims management companies in the UK are regulated by the Ministry of Justice (MoJ). The MoJ's Conduct of Authorised Persons Rules 2007 begin with a list of five high-level principles, the first of which is 'A business shall conduct itself with honesty and integrity.'

Other obligations placed on claims management companies by the MoJ include:
- A requirement to have procedures for handling complaints made against them
- To comply with all relevant advertising codes of conduct in the UK
- To avoid high-pressure sales tactics
- To avoid personal cold-calling, e.g. soliciting business door-to-door or in the street
- To clearly disclose any fees likely to be payable before an agreement between the claims company and customer is agreed
- To allow a 'cooling off' period of 14 days after signing an agreement, in which time a customer can withdraw from the agreement without charge
- To state in advertising material that the company is 'regulated by the Ministry of Justice in respect of regulated claims management activities.'

Large numbers of PPI complaints are referred to the Financial Ombudsman Service (FOS). The FOS is an independent organisation set up by government to adjudicate on financial services complaints where the complainant and the financial organisation disagree.

The FOS has issued its own guidelines for claims management companies to follow in PPI cases. Much of this guidance centres around asking the claims company to take reasonable steps to ascertain whether its customer does in fact have any PPI. Unfortunately many borrowers were sold PPI without their knowledge, and unwittingly paid for it over periods of several years in some cases, and so it is often necessary to check the fine print of a credit agreement or bank or credit card statement for any evidence a customer might have paid for PPI.

Another important part of the FOS requirements is that a fully completed customer questionnaire about their recollections of their PPI sale must be sent to the financial institution. In the February 2012 issue of the MoJ's Claims Management Regulation Business Bulletin, the practice of sending incomplete questionnaires was described as 'unacceptable' by the MoJ.
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