Firm found guilty of multiple failures in financial mis-selling claims

PPI: Firm did not provide clients with proper costs information

The Solicitors Regulation Authority (SRA) has decided not to enforce at £65,000 fine it has issued against a financial mis-selling law firm because it is in liquidation.

The regulator said that pursuing the money would have reduced the amount of money available to the general creditors of Legal UK Services in Altrincham.

A notice published yesterday listed multiple failures in the firm’s approach to financial mis-selling claims, including not obtaining the express consent of clients before submitting their claims.

It also did not provide full information to clients about the costs they may be liable to pay the firm for acting on their behalf – it did not explain that defendants may offset any redress against the outstanding debt, which could leave them with the risk of having to pay the firm’s fees using their own funds.

Another breach was not advising clients of all available options to pursue their claims, including receiving free assistance from the Financial Ombudsman Service.

Earlier this month, the SRA issued a warning notice on the conduct of high-volume financial mis-selling claims, saying it was “particularly concerned” about firms taking proper instructions from clients and supervising staff.

Legal UK Services was placed into a creditors’ voluntary liquidation in March, with all live files being transferred to Cheval Legal.

The firm specialised in volume financial services claims, particularly packaged bank account claims and irresponsible home lending claims, as well as Plevin PPI claims.

According to the SRA, it used an online automated process to enter retainers with clients and to submit claims to defendants.

Between March 2020 and September 2021, the firm submitted 100,292 claims and the SRA received reports about it from 13 organisations, including lenders and the Consumer Credit Trade Association. These led to an SRA investigation.

In September 2022, the firm submitted a qualified accountant’s report, which highlighted material breaches of the accounts Rules and/or significant weaknesses in the firm’s systems and controls.

The SRA commenced a second forensic investigation and found accounts rule breaches, such as not maintaining client ledgers across all client matters, carrying out full client account reconciliations or separately recording on client ledgers transactions undertaken through client or business bank account.

This January, the firm notified the SRA that it was suffering financial difficulties and was appointing insolvency practitioners with a view to entering liquidation.

The fine of £65,322 represented 4.4% of the firm’s turnover – as it was an alternative business structure, with two of the three directors not lawyers, the SRA was not constrained by the £25,000 fine limit that applies to traditional law firms.

The SRA said Legal UK Services’ misconduct had the potential to cause “significant harm” to vulnerable clients.

“The firm should have been aware of its obligations to obtain meaningful and informed instructions from clients, provide clients with important information about their other options and about the costs which the firm may charge them. It’s failure to do so showed a concerning lack of judgment.”

The accounts rules breaches, meanwhile, “persisted longer than was reasonable and remedial action was only taken when its failures were brought to its attention by the SRA’s investigations”.

The firm’s co-operation with the regulator was taken into account as a mitigating factor.

It was also ordered to pay the SRA costs of £1,350.

On 12 November, we are running Claims Futures, the first conference of its kind to explore the fast-growing market for volume consumer claims.

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