The Solicitors Regulation Authority is investigating 10 firms for accepting business from claims management companies that have misled consumers about the prospects of getting debts written off.

The regulator renewed an earlier warning about doing business with such introducers, following what it described as a ‘rash of misleading statements in adverts, especially on the internet, making dubious claims or leaving out important information which might breach consumer protection regulations’.

Some of these adverts wrongly suggest that almost all loan or credit card agreements in place before April 2007 are unenforceable under the Consumer Credit Act and can therefore be written off.

SRA chief executive Antony Townsend said: ‘These ads appear to offer an easy way out of difficulty to people who have debts they are struggling to pay. But many credit agreements do meet the legal requirements and, therefore, can’t easily be challenged as unenforceable.

‘We’ve noticed a sharp increase in the number of solicitors getting involved in this activity since last autumn. The SRA is currently investigating 10 firms. Any that are found to have breached rule 1 – the core principles – of the Code of Conduct may face the Solicitors Disciplinary Tribunal.’

The SRA said it is liaising with the Claims Management Regulation Monitoring and Compliance Unit at the Ministry of Justice, which regulates introducers. The head of the unit, Kevin Rousell, said: ‘We won't tolerate claims management businesses that set out to mislead consumers and will do our utmost to make the regulatory regime a hostile one for those not willing to follow the rules. Action against solicitors that aren’t complying with their Code of Conduct is also essential to ensure regulation is working effectively from both ends and that solicitors do their due diligence, including when dealing directly with consumers.’

Citizens Advice has warned that the claims handlers often charge about £500 upfront to check a credit agreement, even though there is no guarantee of success. Where people have several debts, the fees can mount up to several thousands of pounds. People may then be sold a ‘no win, no fee’ agreement to take legal action that can cost them even more.

What to avoidThe SRA advises solicitors to check the advertising of the claims introducers they are dealing with or are approached by. They should avoid accepting business from introducers that make claims like:
  • ‘80% of credit agreements are unenforceable’
  • ‘50 million credit agreements are created every year, at least 25 million are unenforceable’
  • ‘We’ll get your credit cards written off within six weeks!’
  • ‘Fast results guaranteed!’
  • ‘We have a 100% success rate’
  • ‘A positive outcome is guaranteed’
  • ‘We can write off all your outstanding debt, all previous payments could be returned, and you could keep any goods purchased’