People who think they may have been mis-sold payment protection insurance could lose 25% of their compensation if they use a claims management firm, a consumer group has warned.
Which? said firms that secure a payout on their customers' behalf usually take about 25% of it as a fee, which would amount to £825 for the average PPI compensation claim of £2,750.
The banks are facing a total bill of between £7 billion and £9 billion for compensation after PPI was mis-sold to customers taking out loans, mortgages or other financial products. Which? said claims management firms could collectively end up with £2 billion if all eligible consumers used one.
The consumer group said people who win a claim could even end up owing the management firm money, especially if they took out PPI with a loan.
It said if they were still repaying the loan, often the sum won as compensation would be deducted from the outstanding balance, rather than being given the cash, meaning they would have to find the funds to pay the claims management company.
Which? is urging people who think they may have been mis-sold PPI to complain directly to the bank which sold them the product.
Around three million people are thought to be in line for PPI compensation after the banks abandoned a legal battle over new rules on mis-selling that had been introduced by City regulator the Financial Services Authority.
