MI_20-21_claims.qxd 27/2/09 11:12 Page 2
20 | Claims management
Turn the
tables
Loan Resolutions’ Operations Director,
Lorraine Robinson, looks at the rapidly expanding
area of claims management and opportunities for
mortgage advisers
C
laims management in respect of jected to so called excessive and unlawful bank unenforceable in a court of Law, the consumer
unenforceable credit agreement is charges for many years – which merely fuel the may be entitled to have the debt written off. In
a rapidly expanding industry and anger and frustration directed at the banks. addition, any adverse credit associated with that
there is a plethora of companies In a sense, claims management enables the unenforceable credit agreement may also be
offering consumers a service to consumer to turn the tables in their favour. In removed from the credit reference file.
have their debts wiped off. The the current recession, many families are facing
concept is simple: if a credit bankruptcy, repossession of their homes, or hav- Fees
agreement for a loan or credit card has been ing to enter into a Debt Management Plan The fees charged by claims management compa-
written incorrectly and is in breach of the (DMP) or an Individual Voluntary Arrangement nies vary from large upfront fees, which are
Consumer Credit Act 1974, the consumer may (IVA). If any of these options can be avoided, it sometimes non-refundable, to success fees upon
be able to get that loan or credit card debt is understandable that the service of a claims completion of the case which equate to a an
reduced or written off. management company would be more attractive, amount of up to 30 per cent of the debt written
The moral justification for this industry is regardless of the ethics involved. off or monies returned including interest. Some
complicated. On one hand, customers who have With regards to unenforceable credit agree- firms charge solicitors fees of £140 per hour or
borrowed money in good faith are using this ments, this is an unfortunate error by the finan- more. The use of ‘no win no fee’ is often
service to escape from their loan and credit card cial institutions that may cost them dearly. The ambiguous as sometimes this does not always
commitments. On the other hand, in a time of Consumer Credit Act 1974 stipulates the criteri- mean ‘no win no cost’. So called ‘back end’ fees
low interest rates, credit card interest charges on that lenders must follow when lending money can leave the consumer in a worse situation than
generally have never been higher. In addition, and includes regulations about marketing, adver- before as having a debt written off does not nec-
many lenders did not reduce their SVR until tising and the documentation that is sent out to essarily put money back in their pocket. How
almost forced to do so. the consumer i.e. the credit agreement. If the then is the consumer supposed to find a success
Consumers blame the financial institutions for credit agreement is found to contain errors i.e. fee of £1,000’s per case to pay the claims manage-
the current economic crisis and yet they are con- breaches of the Consumer Credit Act 1974, the ment company fees?
tinually being charged more and more for their credit agreement which is a legally binding con- The claims management industry is regulated
debt or not being passed on the savings that they tract could be deemed null and void, or unen- by the Ministry of Justice who fulfil a similar role
feel entitled to. Consumers have also been sub- forceable. If the credit agreement is deemed to other regulatory bodies by issuing guidance
March 2009 Mortgage Introducer
www.mortgageintroducer.com
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