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A claims management company is claiming a victory in the courts that could lead to thousands more borrowers seeking refunds from lenders.
Cartel Client Review, based in Manchester, had a client’s debt written off and her payment protection insurance (PPI) policy refunded after arguing that the commission earned by the credit card provider, MBNA, on the sale of the policy should have been revealed to the borrower.
But fears are growing that the case, which centred on the “unfair relationship” clause of the Consumer Credit Act, will lure more borrowers into the arms of rogue claims handlers who charge expensive upfront fees and fail to deliver on promises.
Lucy Widenka, personal finance campaigner for Which?, the consumer group, says: “The promise of having your debts written off may sound too good to be true — and that’s because it usually is. While some people have had their debts written off in this way, consumers must be aware that success depends entirely on their individual situation.”
Claims handlers take on a variety of cases, but the majority of their work involves helping consumers who believe that they have been mis-sold PPI. However, over the past year there has been an explosion in the number of less scrupulous claims management companies luring customers with promises to “clear all your debts”. Others offer the chance to “write off debts over £5,000 with a government-backed solution”. The advertisements have appeared in newspapers, magazines and online. Consumers are even being bombarded with telephone calls and text messages.
The basis for the claims to clear debts rests on the small print of loan agreements produced before April 2007. Two years ago an amendment of the Consumer Credit Act came into force, requiring loan agreements to contain certain information. Courts are unable to enforce agreements that do not contain details of the loan amount and the frequency and amount of the repayments.
Other cases have rested on a lender’s inability to locate the original loan agreement, which it must do in court if it is to prove that the agreement is valid. MBNA insists that it was its failure to locate the original loan agreement that was the deciding factor in the case against Cartel Client Review.
Many claims handlers charge upfront fees of up to £600 plus VAT to examine cases to decide whether clients have a case worth pursuing. In the limited number in which claims have been successful, the claims handlers have secured an out-of-court settlement from lenders. The claims handling companies then take up to 30 per cent of the refund, plus VAT.
A recent report by the British Bankers’ Association, seen by Times Money, concludes that many, if not all, the websites of claims handling companies contravene Advertising Standards Authority guidelines.
There are also concerns over the sales techniques being employed: cold-calling potential customers and offering to fight cases on a “no win, no fee” basis without any mention of upfront fees. The report found that more than half of claims management companies that promised to operate on a “no win, no fee” basis did actually charge fees that were not refunded if the case was lost.
The industry defends itself vigorously but acknowledges that that there are some rogue operators.
Andrew Wigmore, of Claims Standards Council, the trade body, says: “No company can guarantee to get all their client’s debts written off. It is as simple as that. Any company that promises to do that is lying.”
This week Lord Hunt of Wirral released a report for the Law Society, raising concerns over the swarms of claims handling companies that are targeting consumers. There are now more than 3,000 operating in the UK, almost double the number a year ago.
The Ministry of Justice (MoJ) has shut down 116 operations since it began regulating claims management companies in 2007. The businesses have been banned for using misleading advertising or for charging excessive fees. Kevin Rousell, head of claims management regulation for the MoJ, says: “There is a small proportion of firms operating in the market who are deliberately trying to mislead customers. About a quarter are not complying with the rules we have set out.”
The MoJ does not require an entry level qualification or legal experience to authorise a new claims handler to operate in the UK.
Borrowers even face the risk of falling prey to criminal gangs posing as claims handling companies. These fraudsters open a small operation and promise to wipe out debts on the condition that customers pay a hefty upfront fee. The gang takes thousands from distressed borrowers before shutting down and vanishing.
Few consumers realise that experts at Citizens Advice, the debt charity, will look at loan agreements to see whether consumers can make a claim. Sue Edwards, of Citizens Advice, says: “These advertisements appear to offer an easy way out to people who have debts that they are struggling to pay. But many credit agreements do meet the legal requirements and cannot easily be challenged as unenforceable. An adviser can check for free if there may be genuine grounds for a challenge.”
Lenders are stepping up the pressure on those who seek to cancel debts, warning that their credit files will be marked to indicate that the debts have not been cleared. Such a mark on a credit report would make it extremely difficult for borrowers to secure credit in the future.
Consumer groups also urge borrowers who are convinced that they have been mis-sold PPI to claim refunds for themselves using the free template letters available on many websites.
Ms Widenka says: “If you think that you have been mis-sold PPI, you can use Which?’s free online tool to make a claim in about five minutes — it’s a really easy process.”
The Financial Ombudsman Service (FOS) dealt with 30,000 complaints of PPI mis-selling last year and is receiving 750 a week. About half are from claims management companies, but its internal review suggests that the outcome is no different if consumers get in touch themselves.
Emma Parker, of the FOS, says that the ombudsman prefers contact from individuals, who are more likely to provide all the details accurately and in their own words. She says: “Claims management companies can forget to pass on all the information required or miss deadlines.”
Steve Edwards, a business owner from Rye, East Sussex, was approached by a claims handler promising to secure a refund for his PPI policy. “I don’t know how it got my details, but it gave me the inspiration to look into it,” he says.
When Mr Edwards looked at his policy he realised that it had been mis-sold. However, rather than go back to the claims business that originally approached him, he visited the Which? website and downloaded a template letter. He e-mailed the letter to MBNA, the provider of his £7,000 Virgin Money-branded loan.
“I realised that I had been charged thousands of pounds for PPI, which I do not remember agreeing to,” he says. “No one had confirmed that it was part of my loan and I was not aware that interest was added to the cost of the premium.”
Mr Edwards eventually secured a refund of £1,220 from MBNA.
Compensation checklist
If you are paying for PPI with a loan but were not told key facts, including that the insurance was optional, you were mis-sold. Visit which.co.uk for more information.
In 2006 the Office of Fair Trading ruled that credit card fees of up to £35 were unfair, capping the acceptable amount at £12. You can claim back the difference by writing to your card provider.
Overdraft charges claims are on hold, but a ruling is expected in the Supreme Court by Christmas. To make a claim, write to your bank using template letters available online.
http://www.timesonline.co.uk/tol/mon...cle6868218.ece
Cartel Client Review, based in Manchester, had a client’s debt written off and her payment protection insurance (PPI) policy refunded after arguing that the commission earned by the credit card provider, MBNA, on the sale of the policy should have been revealed to the borrower.
But fears are growing that the case, which centred on the “unfair relationship” clause of the Consumer Credit Act, will lure more borrowers into the arms of rogue claims handlers who charge expensive upfront fees and fail to deliver on promises.
Lucy Widenka, personal finance campaigner for Which?, the consumer group, says: “The promise of having your debts written off may sound too good to be true — and that’s because it usually is. While some people have had their debts written off in this way, consumers must be aware that success depends entirely on their individual situation.”
Claims handlers take on a variety of cases, but the majority of their work involves helping consumers who believe that they have been mis-sold PPI. However, over the past year there has been an explosion in the number of less scrupulous claims management companies luring customers with promises to “clear all your debts”. Others offer the chance to “write off debts over £5,000 with a government-backed solution”. The advertisements have appeared in newspapers, magazines and online. Consumers are even being bombarded with telephone calls and text messages.
The basis for the claims to clear debts rests on the small print of loan agreements produced before April 2007. Two years ago an amendment of the Consumer Credit Act came into force, requiring loan agreements to contain certain information. Courts are unable to enforce agreements that do not contain details of the loan amount and the frequency and amount of the repayments.
Other cases have rested on a lender’s inability to locate the original loan agreement, which it must do in court if it is to prove that the agreement is valid. MBNA insists that it was its failure to locate the original loan agreement that was the deciding factor in the case against Cartel Client Review.
Many claims handlers charge upfront fees of up to £600 plus VAT to examine cases to decide whether clients have a case worth pursuing. In the limited number in which claims have been successful, the claims handlers have secured an out-of-court settlement from lenders. The claims handling companies then take up to 30 per cent of the refund, plus VAT.
A recent report by the British Bankers’ Association, seen by Times Money, concludes that many, if not all, the websites of claims handling companies contravene Advertising Standards Authority guidelines.
There are also concerns over the sales techniques being employed: cold-calling potential customers and offering to fight cases on a “no win, no fee” basis without any mention of upfront fees. The report found that more than half of claims management companies that promised to operate on a “no win, no fee” basis did actually charge fees that were not refunded if the case was lost.
The industry defends itself vigorously but acknowledges that that there are some rogue operators.
Andrew Wigmore, of Claims Standards Council, the trade body, says: “No company can guarantee to get all their client’s debts written off. It is as simple as that. Any company that promises to do that is lying.”
This week Lord Hunt of Wirral released a report for the Law Society, raising concerns over the swarms of claims handling companies that are targeting consumers. There are now more than 3,000 operating in the UK, almost double the number a year ago.
The Ministry of Justice (MoJ) has shut down 116 operations since it began regulating claims management companies in 2007. The businesses have been banned for using misleading advertising or for charging excessive fees. Kevin Rousell, head of claims management regulation for the MoJ, says: “There is a small proportion of firms operating in the market who are deliberately trying to mislead customers. About a quarter are not complying with the rules we have set out.”
The MoJ does not require an entry level qualification or legal experience to authorise a new claims handler to operate in the UK.
Borrowers even face the risk of falling prey to criminal gangs posing as claims handling companies. These fraudsters open a small operation and promise to wipe out debts on the condition that customers pay a hefty upfront fee. The gang takes thousands from distressed borrowers before shutting down and vanishing.
Few consumers realise that experts at Citizens Advice, the debt charity, will look at loan agreements to see whether consumers can make a claim. Sue Edwards, of Citizens Advice, says: “These advertisements appear to offer an easy way out to people who have debts that they are struggling to pay. But many credit agreements do meet the legal requirements and cannot easily be challenged as unenforceable. An adviser can check for free if there may be genuine grounds for a challenge.”
Lenders are stepping up the pressure on those who seek to cancel debts, warning that their credit files will be marked to indicate that the debts have not been cleared. Such a mark on a credit report would make it extremely difficult for borrowers to secure credit in the future.
Consumer groups also urge borrowers who are convinced that they have been mis-sold PPI to claim refunds for themselves using the free template letters available on many websites.
Ms Widenka says: “If you think that you have been mis-sold PPI, you can use Which?’s free online tool to make a claim in about five minutes — it’s a really easy process.”
The Financial Ombudsman Service (FOS) dealt with 30,000 complaints of PPI mis-selling last year and is receiving 750 a week. About half are from claims management companies, but its internal review suggests that the outcome is no different if consumers get in touch themselves.
Emma Parker, of the FOS, says that the ombudsman prefers contact from individuals, who are more likely to provide all the details accurately and in their own words. She says: “Claims management companies can forget to pass on all the information required or miss deadlines.”
Steve Edwards, a business owner from Rye, East Sussex, was approached by a claims handler promising to secure a refund for his PPI policy. “I don’t know how it got my details, but it gave me the inspiration to look into it,” he says.
When Mr Edwards looked at his policy he realised that it had been mis-sold. However, rather than go back to the claims business that originally approached him, he visited the Which? website and downloaded a template letter. He e-mailed the letter to MBNA, the provider of his £7,000 Virgin Money-branded loan.
“I realised that I had been charged thousands of pounds for PPI, which I do not remember agreeing to,” he says. “No one had confirmed that it was part of my loan and I was not aware that interest was added to the cost of the premium.”
Mr Edwards eventually secured a refund of £1,220 from MBNA.
Compensation checklist
If you are paying for PPI with a loan but were not told key facts, including that the insurance was optional, you were mis-sold. Visit which.co.uk for more information.
In 2006 the Office of Fair Trading ruled that credit card fees of up to £35 were unfair, capping the acceptable amount at £12. You can claim back the difference by writing to your card provider.
Overdraft charges claims are on hold, but a ruling is expected in the Supreme Court by Christmas. To make a claim, write to your bank using template letters available online.
http://www.timesonline.co.uk/tol/mon...cle6868218.ece
