Got a complaint? Avoid this rip-off!

Increasing numbers of you are using claims management firms to complain on your behalf. Here's why they are a rip-off - and what you should be doing instead.

It's hard to think of a time when us ordinary Brits had more cause to complain about our financial services companies. Whether they are selling us dodgy payment protection insurance (PPI), arbitrarily ramping up credit card charges, or jumping on the first sign of a mortgage borrower heading towards arrears, there are plenty of reasons for us to raise concerns.

And that fact was emphatically demonstrated in last week's annual report from the financial complaints watchdog, the Financial Ombudsman Service (FOS). The FOS handled a mammoth 789,877 initial complaints and enquiries over the past year - the equivalent of more than 3,100 phone calls, emails and letters each and every day.

However, while most of us are only too happy to do our own complaining, the number of people utilising claims management firms to handle their complaints increased by 40% during the year.

Where there's blame, there's a claim

And there is one area in particular which seems to be the claims management specialism - PPI.

In the 07/08 financial year, there were 10,652 complaints about good old PPI, of which 14% came through claims management companies. However, by the 08/09 financial year, this had rocketed to 31,066 PPI complaints, with claims management outfits representing more than half.

In other words, complaints about PPI via claims management companies jumped from just short of 1500 to more than 15,000 in the course of 12 months.

Clearly there are big bucks to be made from raising PPI queries.

No money back, no guarantee

Because let's remember, these firms are ambulance chasers. They are not putting forward your problems out of the goodness of their hearts, or out of any desire to see justice prevail.

These firms typically offer to take on your case against a provider in exchange for a percentage of the eventual refund - sometimes up to a massive 25% - should you be successful. And, some even ask for the money upfront.

But they are not doing anything you cannot do yourself!

Ambulance chasing

Concerns about claims management scams are nothing new - we have raised our own issues previously in Don't waste your money on this!

But with the credit crunch starting to hit people's pockets, many are tempted to turn to them in order to try to ease their financial situation. And while there are some that may offer a reputable service, there are many sharks out there.

The Ministry of Justice authorises and regulates such claims businesses, while the Office of Fair Trading (OFT) requires them to hold certain credit licenses. Yet in August last year, both organisations made clear their concerns that Brits were being misled into pursuing cases, and warned consumers to be cautious before signing up.

Both bodies followed that in February this year with a warning to the firms themselves about their spurious marketing claims. A number of dodgy claims management outfits have since bitten the dust.

The FOS itself suggests that by using such firms, customers are wasting money, as it decides cases based on the facts, not how the arguments are presented.

And it highlighted that, particularly with PPI complaints, the claims were presented in a standard format, with no information about the specific cases, which only serves to make it more difficult for the FOS to resolve the case properly.

The FOS report also detailed other areas where claims management firms have inadequately handled the complaint, noting the firms had done little work themselves to look into the merit of the case, and had simply proceeded with many complaints, even though there was clearly little chance of success.

The alternative to claims management

So if you don't want to hand over cash with no guarantee of success, but have a genuine grievance, what should you do?

Contact the provider direct

You should always give the provider the opportunity to rectify any mistake they may have made first, before you go the authorities.

Make sure you have all the relevant details to hand, and keep a log of any conversations you have with the firm, and copies of any documentation you send them. This may come in useful later.

Get free advice

There are plenty of organisations you can speak to if you are unsure whether you have a case. Both the Citizens Advice Bureaux and the FOS itself are on hand to talk through any issues you may have, and provide guidance on whether you should proceed with your complaint. You may also wish to consider the Financial Services Authority's consumer website, Money Made Clear.

Go to the authorities

If the financial company has not responded satisfactorily to your complaint, then go straight to the relevant authorities.

The FOS will most likely be your best port of call as the only issues it does not deal with are occupational pension schemes, the way firms make their business decisions (for example in deciding who a company providing credit will lend to) and issues over the performance of an investment.

However, the FOS can only proceed with a complaint if you have already complained directly to the provider and are not happy with their response, or if eight weeks have passed since you made your complaint, with no resolution.

You can complain to the FOS up to six months after the date on the firm's letter in response to your complaint, so get moving!

The Pensions Advisory Service and the Pensions Ombudsman both deal with complaints about the way pension schemes are run. Again, with both bodies you will need to have attempted to resolve your issue with the provider directly before going to them.

Indeed, the Pensions Ombudsman generally will not even look into an issue, unless you have been to the Pensions Advisory Service first.

The most important thing to remember is that claims management firms don't do anything you cannot do yourself, and will take a healthy chunk out of any compensation you may be awarded.

I know it's a pain to do the legwork yourself, but should you win, you'll get all of the money you are owed - not just some of it.

More: Don't Waste Your Money On This!