Endowment claims firms: Easy option or expensive mistake?
While experts label endowment mortgage claims companies expensive and unnecessary, consumers like using them.
In the wake of the recent endowment mortgage scandal, a large number of companies have sprung up offering to secure compensation for consumers in exchange for a percentage of the settlement.
These companies market themselves aggressively in newspapers and on television, but have drawn criticism from many experts.
However, figures from the Financial Services Consumer Panel show endowment mortgage holders value the time saved through using such firms as well as the help they offer on what is seen as a complicated process.
And despite charging 20 to 30 per cent of the settlement as a fee, two claimants in three think they are getting value for money.
"Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves," said John Howard, chairman of the Financial Services Consumer Panel.
But there are real questions about how much time and effort these firms actually save.
You are entitled to claim compensation from your endowment mortgage provider if you were mis-sold a policy and could lose out financially because of this.
And applying for compensation for an under-performing endowment mortgage can often be as simple as simple as calling the policy provider or writing a single letter.
As such, being charged up to 30 per cent of the settlement seems excessive, and some mortgage providers refuse to pay money to these firms.
Additionally, the consumer panel found evidence some endowment claims firms only act for individuals where there is a good chance of success and companies simply stop communicating with clients if they feel the claim is not likely to be successful.
"It is not clear that the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms - not giving details about the fees up front, and poor service in telling clients when the claim was not successful," said Mr Howard.
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