Credit card companies to the rescue for consumers after CMCs fail to comply with LeO orders

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By Legal Futures

23 June 2016

Tunnicliffe: challenges for consumers

Tunnicliffe: challenges for consumers

People with complaints about claims management companies (CMCs) are more likely to receive a financial remedy from their credit card provider than the Legal Ombudsman (LeO), it has emerged.

The most three most complained-about CMCs have since surrendered their authorisation, leaving questions about whether complainants actually receive the compensation ordered.

The first decision data published about CMCs, covering 28 January 2015 to 31 March 2016, showed that Rock Law was responsible for 164 complaints, of which 161 were upheld. Most of the remedies ordered were that it refund fees of between £300 and £749, with some to waive unpaid fees.

Last year, the Claims Management Regulator handed out a record fine of £567,423 to Rock Law, based in Swansea, for coercing clients into signing contracts to make PPI claims, without giving them enough time to understand the terms and conditions before taking unauthorised payments. The company then surrendered its authorisation in the face of stringent conditions on its future work.

Dorset company Credit Clear Services – which traded as Full Financial Review – was the subject of 22 complaints, all but one of which was upheld, and ordered to refund fees already paid, mostly between £1,000 and £4,999. Ifonic plc, also based in Swansea, generated 20 complaints, 18 of which were upheld and again led to orders to refund fees.

LeO’s head of operations, Simon Tunnicliffe, said: “Between January 2015 and May 2016, our scheme has helped 883 CMC customers obtain some form of financial compensation – 529 people obtained their money back from their credit card provider (through a consumer rights claim under section 75 of the Consumer Credit Act) and 354 people achieved a financial remedy through an ombudsman decision.

“There are challenges for consumers, including where the CMC is no longer regulated, and we are working closely with companies and with the regulator to address these issues. Publishing decisions is one way of promoting transparency across the CMC sector. We also work with other third parties, such as liquidators, to assist CMC customers in recovering the compensation they are owed.”

Section 75 says that a credit card company is jointly and severally liable for any breach of contract or misrepresentation by the company to which the credit card holder has paid money. Consumers are able to make a section 75 claim alongside their direct claim with the CMC, although can only recover the money once.

The figures showed that of the 394 complaints detailed, all were for financial services CMCs except for 19 in personal injury, 10 in employment and two others.

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