Dealing with claims for mis-sold payment protection insurance (PPI)
Issued on 4 January 2012
This note reminds practitioners of their professional duties when dealing with claims relating to mis-sold payment protection insurance. It may also be relevant in any situation in which other sources of help are available to the client. This advice does not form part of the SRA Handbook and is not mandatory, but the SRA may have regard to it when exercising its regulatory functions.
In April 2011, the High Court ordered banks to pay back up to £4.5bn in compensation to consumers over the mis-selling of PPI. The Ministry of Justice and the Financial Ombudsman Service have since provided consumers with detailed information on how to make a claim. The SRA is aware that a number of firms are offering to act for clients in making PPI claims and wishes to remind practitioners of the need to ensure that clients and potential clients:
- i. are not taken advantage of and do not suffer detriment;
- ii. do not instruct your firm as a result of misleading information or publicity;
- iii. have sufficient information to make informed decisions about instructing you;
- iv. receive independent advice and a proper standard of service.
You will need to exercise your judgement in deciding how you achieve the right outcomes for your clients, bearing in mind the Principles and Outcomes set out in the SRA Handbook.
As with any regulatory issue, your starting point will be the Principles set out in the SRA Handbook.
The most relevant Principles in this situation are that you must
- act with integrity;
- not allow your independence to be compromised;
- act in the best interests of each client;
- provide a proper standard of service to your clients; and
- behave in a way that maintains the trust the public places in you and in the provision of legal services.
You must also achieve the Outcomes set out in the relevant chapters of the SRA Code of Conduct 2011.
Publicity for this work must be consistent with the Principles and you must achieve the relevant outcomes in Chapter 8, including:
- your publicity is accurate and not misleading, and is not likely to diminish the trust the public places in you and in the provision of legal services; and
- your publicity relating to charges is clearly expressed.
You may not be achieving these outcomes if, for example, you suggest that by instructing your firm clients will obtain a more favourable result than if they make the claim themselves. You will need evidence to substantiate any statements made.
You will also need to ensure that any publicity relating to your charges is not misleading, for example where your charges are calculated as a percentage of any "compensation" recovered you will need to make clear whether VAT is included and whether any sums written off by a lender are included in the calculation.
You must achieve the following Outcomes in relation to the information you give to clients and potential clients:
- you treat your clients fairly;
- you provide services to your clients in a manner which protects their interests in their matter;
- clients are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them;
- clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter.
You will need to consider the needs and circumstances of each individual client, for example whether they are particularly vulnerable because they are in financial difficulty or whether they may have difficulties understanding the information you give them.
You may need to discuss with the client whether your involvement in their matter justifies the cost, including telling the client about the possibility of making the claim themselves, that it is relatively straightforward to do so and that various sources of free help are available, for example on the FOS consumer helpline and website.
Some clients will wish to instruct you, simply to save themselves the time and effort involved or because they have difficulties with communication. It is important that you are able to show that clients have made an informed decision, having considered the options available and that you have treated them fairly.
Standard of work
You must ensure that the service provided by your firm is of a proper standard and that you act in the best interests of your clients. You will need to consider whether the staff dealing with claims are receiving proper training and supervision and whether any correspondence you send is clear, appropriate in the particular circumstances and provides the information the business or FOS needs to deal with the claim.
The FOS website includes standard forms which can be used for complaining both to the business concerned and to the FOS.
If you are receiving referrals from third parties, such as a claims management company (CMC) you will need to consider the outcomes in Chapter 9 (Fee sharing and referrals). These include:
- your independence and professional judgement are not prejudiced by virtue of any arrangement with another person;
- your clients' interests are protected regardless of the interests of the introducer or your interest in receiving referrals;
- clients are in a position to make informed decisions about how to pursue their matter;
- clients are informed of any financial or other interest which an introducer has in referring the client to you.
You may therefore need to consider:
- whether the client has entered into an agreement with the introducer which is not in the client's interests and whether you should advise the client of this and any steps they can take to extricate themselves from that agreement (e.g. if there is a cooling off period)
- whether any instructions passed to you by the introducer reflect the client's wishes and whether those instructions need to be confirmed with the client;
- whether the introducer is seeking to control the way in which you deal with the client's matter e.g. requiring you to use letters drafted by the introducer or to provide confidential information to the introducer.
You will need to bear in mind that the person wishing to make the claim is your client, not the CMC.
Further advice on the SRA Principles and the SRA Code of Conduct can be obtained from the Ethics Helpline.