Allegedly it had induced clients to sign up for its services by offering a ‘no win, no fee’ arrangement. Its clients paid an advance fee of £299, which was stated to be refundable in the event that the compensation claim did not succeed.
The investigation found the company to be insolvent and to be retaining and using the compensation awards it had collected on behalf of a number of its clients as working capital. It had also failed to refund the advance fees paid by those clients whose compensation claims proved unsuccessful.
While this is a very regretable situation, in my opinion it was only a matter of time before this happened. I alerted the Financial Services Authority (FSA) to the risk of this very scenario years ago when I attended one of its regional roadshows. I was told quite emphatically by its representative on the day that the regulator will not be regulating the activities of such companies.
Surely now the FSA must see the error in not doing so?
It’s bad enough that these ‘ambulance chasing’ companies can take up to 25 per cent of the compensation award as part of their fee, let alone be allowed to treat customers so unfairly and get off with it scot-free. Isn’t it about time that the FSA started offering clients real protection by bringing such firms within a regulated environment?
Jim Gillespie
Director, Independent Financial Services
