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SRA warns against excessive legal fees for PPI claims

The Solicitors Regulation Authority (“SRA“), the regulatory body of solicitors in England and Wales, has conducted a thematic review of law firms acting on claims alleging “mis-sold” PPI. The review highlighted what the SRA regards as two significant shortcomings of such firms: (i) overcharging clients, and (ii) the use of standardised letters.

The SRA’s review follows an earlier warning in August 2017 that fees above 15% of the total reward received by a claimant in a PPI claim could be unreasonable in the absence of justification (with evidence) for the high fees. That justification will usually be in terms of the work and risks involved. In addition, the soon to be implemented Finance Guidance and Claims Bill, will introduce a 20% cap on the fees that firms may charge clients, irrespective of the complexity of the claim, risk, or how much work is involved in bringing the claim.

In its recent review the SRA interviewed 20 (out of what is understood to be possibly less than 100) law firms that were actively still advising on PPI claims. The SRA found that 4 out of 5 firms charged clients over 25% of the redress received; some firms charged as much as 50%. In addition, the SRA said that of the 60 files reviewed, 16 contained standardised letters of claim (letters with identical wording, where only client information was changed).

The SRA remains concerned with ensuring that “firms should not charge excessive fees for helping clients get their money back and should collect no more than a 15% slice of the reward“. This is notwithstanding the government’s soon to be introduced  cap.

Consequently, the SRA has issued a second warning to the legal industry, reminding firms that they have a duty to act in their clients’ best interests. Those that fail to comply with this duty (including justifying the fees charged) face the prospect of regulatory action. Indeed, in the wake of its investigation, the SRA has referred three of the interviewed firms into its disciplinary processes. There are now eight firms currently subject to disciplinary action arising out of PPI activity.

SRA Chief Executive, Paul Philip reminded the industry that, “in the majority of cases, PPI claims can be handled in a fairly straightforward manner by members of the public themselves without attracting a fee. We expect solicitors to always advise their clients accordingly“.  Whilst the SRA accepts that lawyers may need to be engaged in complicated cases, “the fees charged must be proportionate to the work involved“.

© Copyright 2018 Squire Patton Boggs (US) LLP

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About this Author

Garon Anthony, Squire Patton Boggs, litigation attorney
Partner

Garon Anthony is a partner in the Litigation Practice Group. He has specialised in dispute resolution work since he qualified as a solicitor and has considerable experience in general corporate and commercial litigation work, acting for both private and public sector clients.

Garon regularly resolves disputes for clients in the financial services/insurance sector. That encompasses professional negligence, fraud issues/recovery processes, dealing with claims and complaints by customers of the mis-selling of retail products, handling insurance policy coverage disputes for corporate...

44 121 222 3507
Mariyam Harunah, Squire Patton, professional negligence lawyer, debt recovery attorney
Associate

Mariyam regularly acts for a diverse client base, including, SMEs, FTSE 100 and 250 corporations, public bodies, developers, insurers and individuals.

Mariyam has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, misrepresentation, defamation, professional negligence, debt recovery and insurance.

44 121 222 3175