Mrs X used a claims management company (CMC) because she believed she had been charged unfairly by a large number of credit card companies, banks, and other financial service providers she had used. She agreed that she would pay the CMC 25% plus VAT of any charges they recovered. The CMC managed to recover more than £800. A large proportion of this was offset against her debt.
Mrs X set up a standing order to pay the CMC for this work.
After making a payment of £30 every month for three and a half years, Mrs X wrote to the CMC to ask if she had paid off her bill. The CMC did not respond. Mrs X contacted them three more times over the next six months and a year later the CMC acknowledged that Mrs X had paid them more than she owed and offered her a refund.
Mrs X accepted the refund but still had five claims ongoing with the CMC and had not had any substantial updates in writing for four years, so she told the CMC she wanted to cancel the remaining claims. The CMC agreed to the cancellation, but charged Mrs X a £2000 cancellation fee for the work they had already completed on the claims. Mrs X was not happy with this fee and complained to the CMC. In response, the CMC offered Mrs X a 50% reduction of the cancellation fee. Mrs X was still unhappy and brought her complaint to the Legal Ombudsman.
Our investigation evidenced that there were service issues and that the CMC:
- Had not kept Mrs X regularly updated during the five years they took to deal with her claims;
- Had not responded to queries and concerns she raised with them;
- Had not set out clearly the potential costs of cancelling the contract; and
- Charged for duplicated paperwork that was not relevant.
When we explained this, the CMC agreed to reduce their cancellation fee by 75% to £500, which they agreed could be paid back in monthly instalments of £15. This meant that Mrs X could pay back the amount on a more affordable basis. The company also acknowledged that the cancellation costs were not as clear as they could be and agreed to look over their contracts, even though over the time since Mrs X had first written to the company regarding her concerns they had vastly improved their complaints procedure.
Mrs X was pleased with this, and accepted it in resolution to her complaint.
Learning points for CMCs:
This case highlights to CMCs, the importance of:
- Providing regular updates
- Responding to queries as soon as they arise
- Being clear about cost information and cancellation fees
- Only completing work that is essential and necessary to progress the claim