Shameless claims firms are blocking struggling borrowers from getting the redress they are due, the boss of Amigo Holdings has warned.
Claims management companies (CMCs) offer to ‘help’ customers win compensation from firms such as Amigo Loans and Provident Financial.
But those CMCs are charging customers up to 36 per cent of redress they receive – and in some cases preventing borrowers from getting any relief, according to Amigo’s chief executive Gary Jennison.
A change in rules around affordability last year meant many borrowers of high-cost credit were found to have been handed loans which they should never have received.
A good friend?: Borrowers who were offered cash compensation by Amigo have had up to 36 per cent of their redress creamed off by CMCs
Firms including Amigo and Provident were forced to set up multimillion-pound compensation funds. Keen to get a share of that money, CMCs began drumming up more claims as they offered to help borrowers find out if they were due redress.
But their treatment of those customers has been branded ‘immoral’ by MPs.
Borrowers who were offered cash compensation by Amigo have had up to 36 per cent of their redress creamed off by CMCs, Jennison said.
But he added that the outcome was ‘even worse’ for some borrowers who, rather than receiving cash compensation, had their debt repayments slashed by Amigo.
Jennison told the Mail: ‘CMCs have pitched in. One of the bigger ones we deal with charges customers 36 per cent of anything they win. If we’re paying cash it’s easy enough for them to get their money, but if we do a balance adjustment, the CMC only passes that on to the customer if they write a cheque equivalent to 36 per cent of that.
‘It’s outrageous. I first complained to the regulator about this in October, but I haven’t heard of anything being done.’
Labour MP Yvonne Fovargue, chairman of the All-Party Group on Debt, said: ‘This is absolutely immoral behaviour from CMCs.’
Earlier this year, the Financial Conduct Authority suggested a price cap on the fees that CMCs can charge customers.
The proposed limit would be 30 per cent for redress worth less than £1,500, tapering off to 15 per cent for claims above £50,000.
However, a final decision on price caps is not due until the autumn.
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