Simon Read: Action at last against claims managers
Saturday 20 March 2010
I have often written about claims management companies in this column as I believe their activities to be largely reprehensible. They prey on hard-up people by telling them that they can write off their debts and be free of financial worries. But often they simple take a fee from a desperate person and do nothing to help them, leaving then in an even worse position.
But there was some good news this week when the Ministry of Justice finally shut down one of the biggest claims companies, Cartel Client Review. As we reported last Saturday, Consumer Credit Litigation Solicitors (CCLS) – the firm that provided legal services for CCR – was shut down by the Solicitors Regulation Authority after accusations of "suspected dishonesty". The law firm was discovered to have tens of thousands of customer files just put in boxes, almost untouched.
Now that Cartel has been shut down, the full extent of its activity is likely to be revealed. It advertised in downmarket newspapers with suggestions it could help people walk away from their debts. In return for a £495 fee, Cartel said it it would check if people's debts, such as on credit cards and other loans, could be legally challenged and written off. In fact, it passed on the actual checking work to solicitors like CCLS.
Cartel is believed to have taken about £20m from up to 70,000 hard-up customers over the past two years. It did have some successes, in that lenders decided to pay up rather than face massive court costs, but those successes were minimal. In effect, it appears that all Cartel did was pocket people's fees while very little work was done for them.
Cartel's activities began to unravel after a series of court cases put paid to its contention that people could write off their debts through a legal loophole. The main argument put forward by Cartel and rival claims companies was that loan agreements struck before April 2007 could be challenged in court under the terms of Section 78 of the Consumer Credit Act and cancelled if the lenders were unable to produce a copy of their original agreement, or if the agreement was illegible or did not contain the specific terms required under the Consumer Credit Act.
But a case in December confirmed that banks and other lenders are allowed to "reconstitute" their terms and conditions to show that their original agreement with a borrower had been in line with the law. In other words banks and other lenders have ery right to chase debts even if they have lost the original agreement.
The Ministry Of Justice announced it was investigating Cartel in February. On Thursday it shut the firm down by suspending its authorisation. However, there are still plenty of other dubious claims companies out there and the MoJ should act and shut them down too.
For customers of Cartel, the Ministry's move has come too late. Cartel's boss, Carl Wright, said this week that the firm doesn't have the money to repay clients. There seems little chance therefore that people suckered in by the adverts will see any of their money back.
The MoJ could only advise: "If you are a customer of CCR your agreement with them, as with any provider, is a private contractual matter between yourself and the provider in which MoJ cannot intervene directly because it is not a regulatory matter for which MoJ has responsibility." In other words, tough.
Other claims management firms are already circulating over Cartel's carcass with one dodgy outfit proclaiming: "Been screwed by Cartel Client Review? We will take over your case." Sadly such opportunism is likely to be rewarded by confused people tempted by the chance of getting their fees back, when all they're likely to get is fleeced of even more cash.
There are lessons for everyone involved in this sorry tale. The claims management industry has come under criticsm from all sides since it started just over two years ago, yet the MoJ still went ahead and issued trading licenses to hundreds of firms. It has subsequently shut down several, but the principle that almost anyone can set themselves up to offer people what is perceived as financial advice is totally wrong. Anyone who has turned to these firms for help has been misadvised and probably have lost money.
On the other side of things why have so many people felt the need to turn to these firms? Largely in desperation, I suspect. Some may have foolishly believed they could walk away from their debt, but most were tempted by what they thought of as a legitimate way to take on their banks and credit card companies and their excessive charges. If it had been legitimate, would the charges have been so high?
A fond farewell to unwanted cheques
MBNA has announced plans to scrap credit card cheques from the end of the month. It should have happened years ago. The cheques have been sent out unrequested to credit card holders for years. While most people have simply torn them up, struggling folk have been tempted to borrow extra cash.
But the price has always been high and those who have been tempted are often those who can ill-afford to do so. A £500 cheque could easily spiral by an additional £150 in just 12 months once the fees – at 3 per cent – were added to interest at 28 per cent.
"Sending these cheques to people with little financial discipline or willpower was akin to posting bars of chocolate through a school letterbox," says Andrew Hagger of Moneynet.co.uk.
The other issue with them was security. Because recipients didn't know when they were sent, they would have no clue if they were stolen until the bills started arriving. Although the credit card companies would have been liable for any losses, there was still the inconvenience.
So let's hope others follow MBNA's move and end the blight of the unwanted and expensive credit card cheque.
Kirstie Allsopp has waded into the female fertility debate again
...and it wasn't caused by an asteroid crash, as first thought
A student's guide to financial survival: You don't have to drown in debt at university
10 tips for taking out a personal loan
Lenders accused of using gimmicks to entice borrowers
Ticking time bomb: Interest rate rises are coming, so start preparing now
More than 300,000 adults are too deeply in debt to apply for bankruptcy
- 1 Snoop Dogg and Jared Leto buy a stake in Reddit as A-list invests $50m
- 2 Prince held a Facebook Q&A and this is the only question he answered...
- 3 35,000 walrus gather on north-west Alaska beach 'for a rest'
- 4 Brad Pitt, on the moment he completely lost his temper with Clint Eastwood's son
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Former Tory donor Arron Banks ups his Ukip donation to £1million following William Hague 'nobody' comment
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
Day In a Page
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000