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Claims management - the new mis-selling- CashQuestions - Claims management - the new mis-selling
02 March 2009 
Claims management is one business that seems to be booming in the credit crunch. These so-called “ambulance chasers” reckon they can save their customers money by claiming compensation for alleged wrongs, and use legal loopholes io stop firms charging their customers what they owe.
Claims management companies are not a new breed. We’ve seen them cash in on endowment mis-selling, unfair bank charges claims and payment protection insurance refunds.
The irony is that the people who benefit most from these claims firms are themselves. They are able to charge a fee for taking up a customer’s legal case, although in the majority of cases the claims could have been handled by customers themselves for nothing.
The latest target of the attention of the claims firms is a point of law regarding section 127 of the 1974 Consumer Credit Act. This specifies very clearly the points that must be contained in consumer credit agreements made before April 2007, when the law was changed. If the agreement does not fulfil the terms specified by the pre 2007 terms of the Act, then the agreement can be deemed unenforceable – and therefore a customer can’t be made to comply with it or made to pay back the money they have borrowed.
Discovery of this loophole has led to a raft of these ambulance chasers advertising their services, telling anxious customers their “experts” can “check” their credit agreements for loopholes and potentially get their debts written off.
This is worrying on a number of fronts. Not least, it is preying on the indebted, who are desperately looking for ways to shed their debts – but at the same time charging them a not inconsiderable fee, in many cases, with little or possibly no chance of success. Furthermore, it is encouraging those with debts to find a quick fix, rather than facing up to the challenge of tackling the cause of their debts and getting help to sort out their affairs.
The practices of these vultures have become so alarming and widespread that earlier this month the Ministry of Justice was forced to issue guidelines for customers about how to deal with claims management companies.
Justice Minister Bridget Prentice said: “Vulnerable people facing debt problems need help and support. We have produced this guidance to protect innocent customers from being misled by businesses advertising easy and quick arrangements for outstanding loan, credit card and other similar debts to be written off and compensation to be obtained.
“We would urge anyone who is considering using a business offering such services to think carefully and seek independent advice before making any final decisions.”
No doubt there are some companies doing a good job for their customers for reasonable fees. The majority are simply opportunists taking advantage of vulnerable people, charging them good money for a worthless service.
Many of these companies advertise in the small ads of local papers, put leaflets through doors or advertise on commercial radio. Ask yourself, do bona fide respectable legal practitioners advertise in this way? Of course not.
Many companies make extravagant claims about their success rate. In one recent television interview a director of one of the leading claims firms was unable to state his company’s success rate, and in the end gave just one example of a successful claim, out of the thousands of cases that he maintained his firm was handling.
The Government has attempted to regulate the ambulance chasers, but policing is reactive and not proactive. The Claims Management Regulator’s department is not staffed and equipped to inspect what all members of the industry are doing and only responds to complaints, so there is plenty of scope for unscrupulous firms to operate under the radar.
Anyone who has worries about the legal enforceability of a credit agreement can seek a consultation with Citizens’ Advice or a local law centre completely free of charge. You don’t need to pay anything.
If you prefer to use a claims management company, be absolutely sure what you are paying for. If you are paying a fee, what is the fee for? Some claims chasers charge as much as £500, with further fees for other legal work. That is a lot of money. If you make a deposit, are you sure you will get it back? Are you sure of the reliability of the company? You won’t get any money back if the company is a fly-by-night operation and goes into liquidation. It only costs a few hundred pounds to set up a website, rent an office. Just how reputable is the company you are dealing with?
If you are having debt problems, seek debt counselling from one of the debt charities such as the Consumer Credit Counselling Service. Avoid these low-lives who prey on the difficulties of others to line their own pockets.
Remember, if you manage to get a credit agreement written off as unenforceable it could still harm your credit record. The company may be powerless to use the courts to make you pay the money back, but it will still say that you owe it on your credit record, it will register a default on the date you stop making payments, and you could be affected and unable to obtain more credit for up to six years.
02 March 2009 Claims management is one business that seems to be booming in the credit crunch. These so-called “ambulance chasers” reckon they can save their customers money by claiming compensation for alleged wrongs, and use legal loopholes io stop firms charging their customers what they owe.Claims management companies are not a new breed. We’ve seen them cash in on endowment mis-selling, unfair bank charges claims and payment protection insurance refunds.
The irony is that the people who benefit most from these claims firms are themselves. They are able to charge a fee for taking up a customer’s legal case, although in the majority of cases the claims could have been handled by customers themselves for nothing.
The latest target of the attention of the claims firms is a point of law regarding section 127 of the 1974 Consumer Credit Act. This specifies very clearly the points that must be contained in consumer credit agreements made before April 2007, when the law was changed. If the agreement does not fulfil the terms specified by the pre 2007 terms of the Act, then the agreement can be deemed unenforceable – and therefore a customer can’t be made to comply with it or made to pay back the money they have borrowed.
Discovery of this loophole has led to a raft of these ambulance chasers advertising their services, telling anxious customers their “experts” can “check” their credit agreements for loopholes and potentially get their debts written off.
This is worrying on a number of fronts. Not least, it is preying on the indebted, who are desperately looking for ways to shed their debts – but at the same time charging them a not inconsiderable fee, in many cases, with little or possibly no chance of success. Furthermore, it is encouraging those with debts to find a quick fix, rather than facing up to the challenge of tackling the cause of their debts and getting help to sort out their affairs.
The practices of these vultures have become so alarming and widespread that earlier this month the Ministry of Justice was forced to issue guidelines for customers about how to deal with claims management companies.
Justice Minister Bridget Prentice said: “Vulnerable people facing debt problems need help and support. We have produced this guidance to protect innocent customers from being misled by businesses advertising easy and quick arrangements for outstanding loan, credit card and other similar debts to be written off and compensation to be obtained.
“We would urge anyone who is considering using a business offering such services to think carefully and seek independent advice before making any final decisions.”
No doubt there are some companies doing a good job for their customers for reasonable fees. The majority are simply opportunists taking advantage of vulnerable people, charging them good money for a worthless service.
Many of these companies advertise in the small ads of local papers, put leaflets through doors or advertise on commercial radio. Ask yourself, do bona fide respectable legal practitioners advertise in this way? Of course not.
Many companies make extravagant claims about their success rate. In one recent television interview a director of one of the leading claims firms was unable to state his company’s success rate, and in the end gave just one example of a successful claim, out of the thousands of cases that he maintained his firm was handling.
The Government has attempted to regulate the ambulance chasers, but policing is reactive and not proactive. The Claims Management Regulator’s department is not staffed and equipped to inspect what all members of the industry are doing and only responds to complaints, so there is plenty of scope for unscrupulous firms to operate under the radar.
Anyone who has worries about the legal enforceability of a credit agreement can seek a consultation with Citizens’ Advice or a local law centre completely free of charge. You don’t need to pay anything.
If you prefer to use a claims management company, be absolutely sure what you are paying for. If you are paying a fee, what is the fee for? Some claims chasers charge as much as £500, with further fees for other legal work. That is a lot of money. If you make a deposit, are you sure you will get it back? Are you sure of the reliability of the company? You won’t get any money back if the company is a fly-by-night operation and goes into liquidation. It only costs a few hundred pounds to set up a website, rent an office. Just how reputable is the company you are dealing with?
If you are having debt problems, seek debt counselling from one of the debt charities such as the Consumer Credit Counselling Service. Avoid these low-lives who prey on the difficulties of others to line their own pockets.
Remember, if you manage to get a credit agreement written off as unenforceable it could still harm your credit record. The company may be powerless to use the courts to make you pay the money back, but it will still say that you owe it on your credit record, it will register a default on the date you stop making payments, and you could be affected and unable to obtain more credit for up to six years.
