FSCS wrongly tells law firm clients their solicitors are unauthorised

FSCS: Sorry for any confusion caused

The Financial Services Compensation Scheme (FSCS) has admitted writing to law firm clients and wrongly informing them that their solicitors were no longer authorised.

The body declined to confirm how many letters it sent out on Tuesday but some have claimed there were thousands.

It provides compensation for consumers when financial firms fail and said in a statement yesterday: “FSCS is investigating an issue which [on Tuesday] resulted in some customers being incorrectly told that their representative was no longer authorised to make a claim to FSCS on their behalf.

“We contacted the representatives concerned yesterday, and we are writing to each impacted customer today to explain what has happened and reassure them that their claims are still being handled as normal.

“We are sorry for any confusion this has caused, and if any customers are concerned they can contact us using the details on our website.”

A spokeswoman would not give any more details at this stage about how the error happened, how many people were affected or even whether it has apologised to law firms – although she said it was writing to them again yesterday.

She also declined to comment on reports that the FSCS was made aware of the issue at 9am but was still sending out letters at 12.30pm.

The letter told clients that the FSCS’s records showed their law firm was no longer regulated and that, as a result, it could not deal with them. But it added that the service would continue to process the claim and the claimant could authorise a new firm to represent them.

Paul McKittrick, a director of Smooth Commercial Law, a law firm in St Helens, told Legal Futures that several clients called immediately on Tuesday after receiving the letter.

“After reassuring them and understanding the root cause of the problem, we then tasked several staff in calling, sending SMS and emailing all our other clients to allay their anxiety and explain the error. We’ll still be handling client calls and queries for the next few days.

“We also contacted the FSCS for more detail. We were advised it was an IT glitch and would be sorted over the next couple of days – hopefully – with another email going out advising that the information in the previous email was incorrect.”

Simon Evans, chief executive of the Consumer Redress Association, a trade body for claims management companies and law firms dealing with financial claims, said: “I am deeply concerned at the potential consumer detriment that will have been caused by what appears to have been a system failure at the FSCS, and the reputational damage that this may have on their representatives in law firms.

“We need the FSCS to engage with the industry fully to firstly rectify this communication and send out a clarification and correction to every affected party as a matter of immediate urgency.

“We then need them to be open and transparent about how this issue has arisen, and why it seems that, despite their knowledge of the problem, these erroneous letters continued to be sent out to consumers.”

Mr Evans said FSCS should also outline how it would deal with claims for compensation from law firms if they lost clients as a result of this, “and for the additional work many firms had to undertake to reassure their clients”.

Julia Cooper, speaking for the recently formed Claims Management Association, said that, although the letter referenced claims management companies as well as solicitors, “it appears only law firms have been affected”.

She continued: “The consumer detriment from this should not be overlooked. Mistrust in financial services is huge; imagine thinking you’d lost your entire pension pot by way of mis-advice – or scam – only to then be wrongly informed that the person helping you to claim it back is not who they say they are?

“The FSCS has really let down consumers, front and foremost. Consumer representatives, and by extension, consumers, are already facing unprecedented challenges right now. It will be difficult for the FSCS to put this right with the firms who may have suffered reputational harm and loss of clients.”

A Solicitors Regulation Authority spokesman said: “The FSCS has made us aware of the issue and we understand it is working to put it right.”

Mr McKittrick said his firm’s experience was that FSCS’s service levels have been in “sharp decline” in the last two to three years.

“We also had concerns on payments we had been told to expect, but have today had confirmed they were not actually sent due to the IT problems, and are now likely to be sometime next week.

“This means further delays for claimants who have already been waiting years for the FSCS to deal with their claims.”

He said the time it took to assess claims was often longer than the 14 months the FSCS said was typical for the pension-related matters that Smooth handled.

“Many of our clients have now entered retirement and the claims we’re conducting were submitted years ago. The FSCS should be settling these much quicker and reimbursing clients to assist them in their retirement at a time where the cost of living exceeds available state pension payments.

“We’ve previously escalated the concerns on delays generally to the FSCS and can’t say with any degree of certainty that things have improved at all. This issue would strongly suggest they haven’t.

“Overall it would be fair to say that we are massively disappointed with the continuing downward spiral of the FSCS’s performance and the impact that is having upon our clients.”

Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Keeping the conversation going beyond Pride Month

As I reflect on all the celebrations of Pride Month 2024, I ask myself why there remains hesitancy amongst LGBTQ+ staff members about when it comes to being open about their identity in the workplace.

Third-party managed accounts: Your key questions answered

The Solicitors Regulation Authority has given strong indications that it is headed towards greater restrictions on law firms when it comes to handling client money.

Understanding vicarious trauma in the legal workplace

Vicarious trauma can happen to anyone who works with clients who have experienced trauma such as domestic or other violence, child abuse, sexual assault, torture or being a refugee.

Loading animation