Claims management companies will rake in more than £12.6m in fees this year from victims of the bank payment protection insurance mis-selling scandal.
The firms target victims with offers to manage compensation claims in return for a quarter of the payout. With average pay-outs standing at £4,534, the firms earn £1,584 for each successful claim through the Financial Services Compensation Scheme (FSCS).
But using the scheme is free while using a claims firm will not noticeably improve your chances of success.
It means many victims are paying handsomely simply to have someone else complete a few forms and cope with the minimal red-tape.
"While it may seem reassuring to have someone else do the paperwork, consumers should not be daunted by the process of making a claim," advised Mark Neale, left, chief executive of the FSCS. "Claims companies take a significant part of the possible pay-out and are no more likely to make a successful claim than consumers can on their own."
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