With the introduction of a new 20 percent cap due on 10 July, the Solicitors Regulation Authority has reminded law firms that they must make sure they are acting in their client’s best interests, and charging appropriately, when handling claims for mis-sold payment protection insurance (PPI). This includes a reminder that, whilst a fee cap has been set, even charges below this threshold may be considered unreasonable if they cannot be justified.
Granted Royal Assent in May, the Financial Guidance and Claims Act 2018 came into force on 10 July and included new provisions dealing with:
- An interim 20 percent fee cap (exclusive of VAT) on any PPI claims.
- A ban on any charges being made if no compensation is recovered.
A review of PPI carried out by the SRA earlier in the year revealed that four out of five firms active in this area were routinely charging fees of more than 25 percent, with some charging as much as 50 percent of the compensation received.
To support firms’ understanding of the new legislation, the SRA have produced an online Q&A and have issued an update to their PPI Warning Notice first published in August 2017.
A deadline of 29 August 2019 is now in place, by which time all claims under the compensation scheme must have been submitted.