Of great concern to dealers has been the sheer number of solicitors and claims management firms seeking to raise complaints on behalf of their clients for the return of so-called discretionary commissions earned during the sale of vehicle finance.
On the 2nd May this year the Solicitor’s Regulation Authority (SRA) issued a warning regarding the actions and business practices of some of these firms including:
· Law firms acting for clients without their knowledge or consent.
· Poor due diligence leading to low quality and/or inaccurate claims.
· Failures to act promptly or adequately in response to instructions, including where clients wish to end their claim process and terminate their retainer.
The SRA appears particularly concerned with the behaviour of firms launching high-volume/bulk claim processes that involve multiple clients.
Full details of the SRA warning may be found at:
https://www.sra.org.uk/solicitors/guidance/high-volume-financial-service-claims/
In summary, the SRA is warning solicitors and claims management firms that when dealing with multiple commission claims they must treat each individual customer as a separate client and obtain the client’s consent to act.
Any failure to do so could result in misconduct proceedings.
MILS has been aware of this issue for some time, and has regularly advised members to check that any solicitors or claims management companies raising complaints or subject access requests are indeed authorised to do so by their client.
This has proven to be a very successful tactic. If a solicitor or claims management company cannot provide a letter of authority, then there is no obligation to respond.
Indeed, we would encourage members to report such claims as the SRA warning now means that such tactics are under full and proper scrutiny and solicitors and claims management companies risk professional sanctions if they do not comply.
This will be welcome news for dealers since the business models of the solicitors and claims management firms concerned rely on high volume and low costs to be commercially viable, and a requirement for increased checks and administration on each individual claim can only reduce the profitability of these businesses and therefore reduce the incentive to put forward many of these complaints.
The SRA’s warning should also provide a glimmer of hope, in that the authorities are finally recognising that the increase in complaints regarding discretionary commissions has been partly driven by the actions of solicitors and management companies, and not always consumer concern over wrongdoing. It will be interesting to see how this feeds into the ongoing FCA review of commission claims.
Please remember that this advice is general in nature and provided for guidance and information only. Should you find yourself in the situation above, we strongly advise that you seek legal advice. If you are interested in the advice and assistance RMI can offer, please contact us on 01788 538 399.
Motor Industry Legal Services
Motor Industry Legal Services (MILS Solicitors) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.
