Case study 9

Case study 9

The case:

Mrs Z instructed a claims management company (CMC) to reclaim Payment Protection Insurance (PPI) on her behalf on a loan she had taken out with her ex-husband. Mrs Z had a court order following her divorce that meant that the loan was her sole responsibility, and as a result she had paid it back in full.

The CMC recovered a refund of 50% of the PPI amount paid on the loan, amounting to £3,586, but informed Mrs Z that they couldn’t collect the remaining 50% because it had been a joint loan. Mrs Z paid the CMC a fee of £1,290 for the 50%.

Mrs Z believed that because she had paid off the whole loan herself as a result of the court order, she was entitled to a refund of all the PPI paid on the loan, so with the help of the Citizens Advice Bureau, Mrs Z wrote to the Bank and the Financial Ombudsman Service to get the remaining PPI refunded to her. Following Mrs Z’s letters and calls, the Bank paid out the additional 50%.

Not long after receiving the cheque Mrs Z started receiving calls and letters from the CMC requesting payment of £1290 for the additional 50% refund she had received.

Mrs Z was not happy with this, as she had obtained the refund herself, and so she complained to the CMC. The CMC offered a reduction of their fee of £215, to £1075. Mrs Z was still not happy with this and contacted the Legal Ombudsman for help.

The Legal Ombudsman’s initial enquiries revealed that:

  • There was no evidence to suggest the CMC carried out any work on the additional 50% refund Mrs Z received from her bank to justify the fee they were charging.
  • There was no evidence to suggest that the CMC offered any support or service in pursuing the additional 50%.
  • The payment that the CMC had received for the initial 50% recovered was a clear reflection of the work that they had completed; however this was where their work ended and was therefore where their charges should end.

The Legal Ombudsman put this to the CMC with a proposal to waive the fees, putting Mrs Z back in the position she would have been in, had no poor service occurred. The CMC agreed, and waived the additional fee of £1,075.

Mrs Z was pleased with this outcome and accepted it as a resolution to her complaint.

Learning points for CMCs:

This case highlights to CMCs, the importance of:

  • Being clear and transparent in respect of costs information
  • Ensuring fees are justified (only charge for work completed to progress a claim)