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Law firms “overcharging” PPI clients

Law firms handling claims over mis-sold payment protection insurance (PPI) are charging clients more than both the level the Solicitors Regulation Authority (SRA) deems reasonable and the cap that will shortly be imposed on them by government, research by the regulator has found.

The SRA said that its research – based on a review of 20 firms handling PPI work – found that four out of five of them routinely charged clients fees of more than 25% of the redress they received, with some charging as much as 50%. All operate under damages-based agreements.

An SRA warning notice last August stated that charging more than 15% could be considered unreasonable, unless justified by the work and risk involved, while the Financial Guidance and Claims Bill – which is currently going through Parliament – is likely to include a 20% fee cap irrespective of the work done.

The review led to three of the firms being referred into the SRA’s disciplinary processes, taking to eight the total number of firms currently subject to disciplinary action linked to PPI activity.

“Although some firms could provide good evidence as to the reason for higher charge and it being proportionate to the work carried outs, others could not,” it said.

“We expect all firms to immediately consider their fee arrangements in light of our warning notice and the impending fee cap.

(Source – Legal Futures website)