A recent High Court decision has put ‘another nail in the coffin’ of a lucrative industry for hundreds of law firms bringing consumer credit claims, a leading litigation expert has told the Gazette.

David Greene, president of the London Solicitors Litigation Association, said a series of cases had shown that courts were now closing down the scope for claims brought on behalf of consumers based on a lender’s failure to comply with the Consumer Credit Act.

Changes to the act introduced in 2008 saw a surge in claims based on unenforceable consumer credit agreements (UCCA). The claims were based on technicalities under the act, for example where a lender is unable to produce an exact copy of the loan agreement.

Government statistics show there are currently 1,176 businesses managing claims in this sector, referring cases to what the claims regulator estimates to be ‘a few hundred’ law firms. Claims handlers dealing in UCCA claims have been criticised by the regulator for their ‘borrow but pay nothing’ pitch to consumers, and the use of inappropriate advertising claiming to ‘wipe out all debts’. The Solicitors Regulation Authority has warned solicitors that they must take responsibility for the way any claims they act on have been gathered by claims companies.

Greene said that a recent case in Manchester District Registry, Carey v HSBC, was indicative of how courts were now rejecting procedural claims, and would be ‘another nail in the coffin’ for this section of the claims industry. The High Court ruled that a credit agreement was still enforceable even though the bank was unable to provide a copy of the actual agreement, as a reconstructed copy was acceptable. The case may be appealed.

Greene added that another recent case, McGriffick v Royal Bank of Scotland, which ruled in favour of the bank in relation to its right to refer information to a credit reference agency, was ‘another indication that the courts are not necessarily going to be sympathetic in procedural complaints against lenders’.

Kevin Rousell, head of the government’s claims regulator, said that while some companies bringing UCCA claims were trying to legitimately enforce consumers’ rights, there were also unsavoury elements. He said such claims ‘reached a peak a few months ago’, but have now begun a ‘downward spiral’.

Rousell added that there were ‘a few hundred’ law firms involved in these claims, ‘mostly small outfits’ but with some ‘quite large scale operations which cover the whole range of financial services claims’.