Claims Regulation - Annual Report / Impact Assessment July 2010

[Amethyst]

Latest News for Claims Management Businesses

• Claims Management Regulation - Annual Report 2009/2010
• Claims Management Regulation - Impact of Regulation third Year Assessment

[Amethyst]

Re: Claims Regulation - Annual Report / Impact Assessment July 2010

QUOTE


inancial products/services
5. At the end of 2009/10 some 1,200 businesses were registered as providing claims management services in the financial services sector, although far fewer were active in this area. Originally centred on mis-sold endowment claims, the market now features a variety of claims for mis-sold financial products or services, such as unfair bank/credit card charges, Payment Protection Insurance (PPI), and Unenforceable Consumer Credit Agreement (UCCA) claims.
6. This sector has proved to be the most high profile over the year – in terms of the number of complaints received, enforcement action taken and resulting media publicity. Businesses operating in this sector have been particularly active in identifying new markets (such as UCCA claims) and during the year high profile enforcement action has been taken against a number of major businesses operating in this sector. The main sub divisions within the financial services sector and significant actions we have taken are summarised below.
Unenforceable Consumer Credit Agreement (UCCA) cases
7. The Consumer Credit Act 1974 (CCA) contains provisions that allow consumers to challenge the enforceability of certain consumer credit agreements. There has been a significant rise in the number of claims management companies and solicitors who claim to be able to help borrowers challenge creditors using consumer credit legislation. The following grounds are often used in such challenges:
where a lender does not or is unable to provide a “copy” of the credit • agreement;
lack of “prescribed terms” (CCA 1974) for pre April 2007 agreements; and•
on unfair relationships grounds (CCA 2006).•
8. UCCA claims have been the major growth area in the financial products and services sector and we have worked closely with bodies such as Office of Fair Trading (OFT) and the Trading Standards Service to challenge the more extravagant claims made by some claims management businesses about the possibility of consumers challenging their loan or credit agreements. We published specific marketing guidance to deal with this, followed by strict enforcement action against such activities.
9. 2009/10 also saw a number of UCCA related cases coming to various levels
of court. Such litigation has helped to clarify the overall position and demonstrated that the courts take a pragmatic approach, and in broad terms, are unlikely to find that agreements are unenforceable unless they are missing important information. Significant UCCA related court decisions include McGuffick v Royal Bank of Scotland plc [2009] EWHC 2386 and Carey v HSBC Bank plc [2009] EWHC 3417 (QB). Although not strictly ’test cases’, the impact
Claims Management Regulation: Annual Report 2009/2010
32
of such decisions has been significant and has had a direct effect on the business models of a number of businesses operating in the UCCA claims market.
10. The OFT also issued guidance for consultation in January 20102. The guidance was issued following OFT concerns that “debtors are being misled as to the meaning and impact of sections 77 to 79 (of the CCA) and that some creditors appear not to understand the nature and extent of their obligations under these sections”. The guidance aimed to clarify the situations when an agreement could or could not be challenged and rendered unenforceable.
11. The High Court decisions and OFT guidance slowed down growth in the UCCA market, although businesses operating in this sector continue to be active in pursuing other possible grounds on which claims to challenge credit or loan agreements could be based. However, overall the peak in UCCA related activity was reached and passed in 2009/10.
12. We have also taken the following specific action to deal with issues arising from the UCCA claims market:
We implemented a revised procedure for authorisation of new and existing • businesses involved in the UCCA sector – to include checks on their processes for effective handling of claims;
We established a specific ’Unenforceable Consumer Credit Agreement’ • (UCCA) stakeholder group that has met 3 times during this year to discuss issues specifically related to claims management regulation, UCCA claims and the financial services sector.

[Amethyst]

Re: Claims Regulation - Annual Report / Impact Assessment July 2010

QUOTE

inancial products/services
5. At the end of 2009/10 some 1,200 businesses were registered as providing claims management services in the financial services sector, although far fewer were active in this area. Originally centred on mis-sold endowment claims, the market now features a variety of claims for mis-sold financial products or services, such as unfair bank/credit card charges, Payment Protection Insurance (PPI), and Unenforceable Consumer Credit Agreement (UCCA) claims.
6. This sector has proved to be the most high profile over the year – in terms of the number of complaints received, enforcement action taken and resulting media publicity. Businesses operating in this sector have been particularly active in identifying new markets (such as UCCA claims) and during the year high profile enforcement action has been taken against a number of major businesses operating in this sector. The main sub divisions within the financial services sector and significant actions we have taken are summarised below.
Unenforceable Consumer Credit Agreement (UCCA) cases
7. The Consumer Credit Act 1974 (CCA) contains provisions that allow consumers to challenge the enforceability of certain consumer credit agreements. There has been a significant rise in the number of claims management companies and solicitors who claim to be able to help borrowers challenge creditors using consumer credit legislation. The following grounds are often used in such challenges:
where a lender does not or is unable to provide a “copy” of the credit • agreement;
lack of “prescribed terms” (CCA 1974) for pre April 2007 agreements; and•
on unfair relationships grounds (CCA 2006).•
8. UCCA claims have been the major growth area in the financial products and services sector and we have worked closely with bodies such as Office of Fair Trading (OFT) and the Trading Standards Service to challenge the more extravagant claims made by some claims management businesses about the possibility of consumers challenging their loan or credit agreements. We published specific marketing guidance to deal with this, followed by strict enforcement action against such activities.
9. 2009/10 also saw a number of UCCA related cases coming to various levels
of court. Such litigation has helped to clarify the overall position and demonstrated that the courts take a pragmatic approach, and in broad terms, are unlikely to find that agreements are unenforceable unless they are missing important information. Significant UCCA related court decisions include McGuffick v Royal Bank of Scotland plc [2009] EWHC 2386 and Carey v HSBC Bank plc [2009] EWHC 3417 (QB). Although not strictly ’test cases’, the impact
Claims Management Regulation: Annual Report 2009/2010
32
of such decisions has been significant and has had a direct effect on the business models of a number of businesses operating in the UCCA claims market.
10. The OFT also issued guidance for consultation in January 20102. The guidance was issued following OFT concerns that “debtors are being misled as to the meaning and impact of sections 77 to 79 (of the CCA) and that some creditors appear not to understand the nature and extent of their obligations under these sections”. The guidance aimed to clarify the situations when an agreement could or could not be challenged and rendered unenforceable.
11. The High Court decisions and OFT guidance slowed down growth in the UCCA market, although businesses operating in this sector continue to be active in pursuing other possible grounds on which claims to challenge credit or loan agreements could be based. However, overall the peak in UCCA related activity was reached and passed in 2009/10.
12. We have also taken the following specific action to deal with issues arising from the UCCA claims market:
We implemented a revised procedure for authorisation of new and existing • businesses involved in the UCCA sector – to include checks on their processes for effective handling of claims;
We established a specific ’Unenforceable Consumer Credit Agreement’ • (UCCA) stakeholder group that has met 3 times during this year to discuss issues specifically related to claims management regulation, UCCA claims and the financial services sector.