United Kingdom

Victims of mis-sold investments losing near to half their compensation

Cheated savers who were sold bad investments are now losing almost half of their compensation money to claims firms.

Money Mail today reports how mis-selling victims are being charged 'astronomical' sums for claims they can make themselves at no cost.

It comes as regulator the Financial Conduct Authority (FCA) announces plans to force firms to charge no more than 30 per cent in a move that could save customers £9.6 million a year.

Rip-off fees: Mis-selling victims are being charged 'astronomical' sums for claims they can make themselves at no cost

Market leader Goodwin Barrett is thought to bring four in every five claims against banks, and takes 48 per cent of any compensation. The firm has won back £120 million since 2008.

Yet mis-sold savers can win compensation free of charge by complaining to the investment provider or the Financial Ombudsman Service (FOS).

The FCA's consultation on the plans will last until April and rules could be set by autumn.

Campaigners say the watchdog needs to act quickly to protect savers. Martyn James, of complaints site Resolver, says: 'The percentages are astronomical and the fact that they have got away with it for so long is absolutely unacceptable.'

Goodwin Barrett - which advertises on television and radio - specialises in claims against major banks which sold investment products to savers who could not afford to take risks.

The type of products mis-sold include stocks and shares Isas, investment bonds and unit trusts. Goodwin Barrett says a fee cap would mean it could not heavily advertise to raise awareness of mis-selling - meaning victims miss out on millions in compensation and let banks off the hook.

Other claims firms in the market include the Consumer Savings Network, which charges 36 per cent and says it has won back more than £30 million. 

It is Your Money asks for 42 per cent, while Expert Pensions Claims charges 36 per cent, and FinancialClaims.com charges 24 per cent.

Financial adviser Neil Liversidge told Money Mail that charging so much could not be justified. He says his firm charged £1,500 (2.5 per cent) to win back £60,000 for a customer.

Former pensions minister Baroness Altmann says: 'There should be much tighter control on the amount permitted to charge, and companies need to prove what they have done for the money.'

The PPI mis-selling scandal saw banks pay out more than £40 billion after they were flooded with complaints - many of them coming via claims management firms. Fees for PPI claims were capped at 20 per cent in 2018.

Responding to an earlier FCA consultation on fees, Goodwin Barrett said that even a cap of 30 per cent would mean it would be forced out of business — denying consumers around £12 million a year in compensation.

Rich pickings: Predatory firms are now syphoning off millions of pounds from compensation owed to savers urged to put money into unsuitable investments

It wrote: 'It is down to Goodwin Barrett to advertise heavily to make the wider public aware of this area of mis-selling and that is a massive outlay.'

However, Andrew Johnson, money expert at the Money and Pensions Service, says you are just as likely to win compensation if you make a complaint to the ombudsman yourself.

He says: 'Don't rush into using a claims management company without making sure you understand their charges and what they'll actually do for you.'

Savers who felt ripped off by Goodwin Barrett have not been able to win their money back from the ombudsman. 

One couple, who had to pay more than £27,000 out of their £56,446 compensation, said the company had been 'underhand' and 'clearly taken advantage of two vulnerable people'.

But the ombudsman disagreed and said the firm had been clear about its fees and had explained that they could make a complaint themselves at no cost.

Another saver complained after the firm took almost half of his £36,000 pension, which had been lost in a risky investment. But the ombudsman again said the fees were clear.

Goodwin Barrett says there was 'systematic mis-selling' of investment products over 20 years. It expects claims to rise this year.

A spokesman says: 'Most people have no idea they may be able to make a claim for the losses they suffered due to unsuitable advice. 

'We make it very clear to customers that they can make a claim to their bank for free and use the ombudsman if unsuccessful.

'We take our regulatory obligations very seriously and give customers a clear choice - you can do it yourself for free or use the experience and expertise of Goodwin Barrett to make a claim on your behalf, subject to our fee.'

Adam French, consumer rights expert at lobby group Which?, says the FCA should also require the firms who mis-sold products to pay the costs of the claims management companies (CMCs). 

He says this would encourage finance firms to handle their customer claims directly, and allow mis-selling victims to keep all of their compensation.

Sheldon Mills, executive director of consumers and competition at the FCA, says: 'When working well, CMCs can provide useful services for consumers. 

'However, consumers can experience harm when they do not understand the nature of the service CMCs provide and where they are charged excessive fees.'

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