Claims Management company closes suddenly due to large debts

claims management company closes due to unpaid debts

A north west Claims Management company running financial mis-selling claims has closed, announcing on its website that cases have been transferred.

The Law Gazette reported that Legal UK Services Ltd, based in Altrincham, told clients last week that it had appointed insolvency practitioners and would cease trading within weeks.

That process appears to have been accelerated this week as the firm stated that all live cases had been transferred to neighbouring Cheval Legal.

Legal UK Services has not said anything further, but an SRA spokesperson said: ‘We are in contact with the firm to make sure that the interests of clients and former clients are protected, and that live matters and client money are dealt with in the right way.’

The company was incorporated in 2016 and claimed on its website to have settled claims on behalf of thousands of clients, securing more than £6m in compensation. It specialised in claiming back mis-sold or unaffordable financial services including personal contract claims, PPI claims and secret commission claims.

The firm capped its fees for non-litigious work in line with the new SRA rules on costs of financial claims.

For litigious claims, clients were charged through a damages based agreement, with the payment coming to 48% of compensation secured.

Latest accounts for Legal UK Services Ltd, covering the year to 31 December 2022, show the company had net liabilities of £2.8m – an increase of more than £2m in the space of a year.

The firm had work in progress valued at £1.55m and £438,000 cash reserves, but owed £1.3m within a year and had longer term debts of £4.2m.

The accounts state that the firm was ‘still in the process of establishing itself in the market’ but that it had built up a database of clients which it was confident would generate leads. Headcount rose from 29 to 38 in 2022.

What is Claims Management?

Claims management is the process of helping individuals or businesses pursue compensation for financial losses, damages, or other harms. This can include claims related to personal injury, property damage, professional negligence, or other legal issues.

In the UK, companies known as a Claims Management Company (CMC) offer services to assist clients in making and managing claims. These companies often operate using a “no win, no fee” model, where they only receive payment if a claim is successful.

However, there have been concerns about the practices of some CMCs and their impact on consumers. The content above mentions a specific company that has come under scrutiny for allegedly charging excessive fees through a damages based agreement.

This means that clients were charged 48% of any compensation secured , which is significantly higher than the typical 25% charged by most CMCs.

In addition to potentially charging excessive fees, some CMCs have also been accused of misleading advertising and pressuring clients into making claims even when it may not be in their best interest. This can lead to individuals pursuing frivolous or unfounded claims, wasting time and resources for both themselves and the legal system.

To combat these issues, the UK government implemented stricter regulations on CMCs. These include requiring them to adhere to a code of conduct and ensuring that all fees are clearly stated and reasonable. Companies found in violation of these regulations can face fines or even lose their license to operate.



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