CLAIMS management companies have raked in almost £5 billion of consumers' compensation for mis-sold Payment Protection Insurance (PPI), according to campaigners.
Citizens Advice Scotland said the firms had pocketed a huge sum of compensation which would otherwise have been paid out to consumers.
It based the figures on the Financial Ombudsman Service's own statistics and its own independent research into the role of the firms, which recover PPI on behalf of people who paid for the insurance.
Citizens Advice also criticised the methods of claims firms, saying some pressurised consumers into pursuing PPI claims while failing to mention that they could have recovered the payments without their help.
Its research found 28% of British adults who have used a claims management company said the firm put a lot of pressure on them to pursue the claim.
Furthermore, 27% said the fee structure of the claims management companies had not been clearly explained.
They also noted that 39% said they did not know they could make a claim without using a claims firm, while almost half said they would have pursued the claim without help from one.
The Citizens Advice is recommending a ban on cold calling and greater clarity in the recovery contract between the CMC and the consumer.
Margaret Lynch, chief executive of Citizens Advice Scotland [CAS], said: "This research lifts the lid on PPI compensation companies' false promises.
"We have seen cases where consumers actually end up out of pocket after being charged more in fees by claims companies than they gained in compensation.
"We would urge anyone who thinks they are affected by this to check out Citizens Advice Scotland's free online guidance, or call our consumer helpline so you can decide what's best for you before jumping into a potentially costly contract."
Citizens Advice chief executive Gillian Guy added: "Consumers have lost out on billions of pounds worth of compensation because banks were too slow to get a grip on the PPI scandal.
"By banks originally dragging their feet and providing inadequate redress, claims management companies seized an opportunity to take up to one-quarter of people's compensation for admin work that consumers can do themselves for free.
"Some claims management companies operate well below the standards that are expected and sometimes outside of the rules. The regulator needs to quickly revoke the licences of firms that are not up to scratch."
There are more than 1000 claims management companies currently operating in the United Kingdom.
PPI also represents 79% of the complaints lodged with the claims management regulator.
Yvonne MacDermid, chief executive of Money Advice Scotland, has warned that claims management companies were exploiting the lack of public knowledge regarding PPI claims.
She said: "The issue here is that many consumers simply didn't know they could claim back their PPI without these companies. People have to remember that if these firms are calling them up out of the blue then they must have something to gain from it.
"It should also be said that the £5bn they have now pocketed is money that could have been put back into the economy through consumer spending.
"I would urge all consumers in that situation to stop and think about their options before proceeding."
She added: "Equally, there are those who are more than happy to pay for the service offered by these companies and that's all down to consumer choice."
Last night, PPI claims management companies approached by the Herald were unavailable for comment.
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