SRA calls on firms to reduce level of PPI fees
Ahead of the Government’s introduction of a PPI fee cap, the Solicitors regulation Authority (SRA) is re-iterating its call for law firms to consider how much they charge in relation to PPI work.
A thematic review on PPI carried out by the SRA has revealed that four out of five firms active in this area are routinely charging fees of more than 25% of the redress they receive, with some charging as much as 50%.
The SRA issued A warning notice, back in August 2017 in which it stated that charging more than 15% could be considered unreasonable, unless justified by the work and risk involved, while the Government’s Financial Guidance and Claims Bill is likely to include a 20% fee cap.
With the bill expected to become law later this year, firms should consider what they are charging clients in PPI cases and also think about what value they add to a claim that justifies clients potentially paying a fee instead of filing a claim for themselves at no cost.
The SRA have stated that they will consider regulatory action where firms cannot demonstrate they have acted in a client’s best interest.
While the number of firms active in this market is thought to be relatively small, possibly less than one hundred, they still collectively handle claims worth hundreds of thousands of pounds. The largest single claim identified during the thematic project was worth more than £25,000.
As drafted the Government cap will impose an absolute limit on fees regardless of how much work is involved in making a claim. In these circumstances it is questionable how firms would be acting in their clients’ best interest by charging fees in excess of the proposed cap.
Law firms can play a role in handling complicated or time-consuming claims, but solicitors must be mindful of their regulatory duty to act in their clients’ best interests. This especially applies when considering whether clients may be better served by pursuing claims themselves, without attracting a fee.
A deadline of 29 August 2019 is now in place, by which time all claims under the compensation scheme must have been submitted.