When it comes to handling something as important as a financial services claim, choosing the right representative can be challenging.
The number of claims management companies and solicitors offering no-win no-fee services has increased dramatically following the PPI scandal and lots of companies are looking for the next claims market where they can generate high volumes of claims.
But this comes with two issues:
- Generating claim enquiries costs money which means marketing spend.
- Claims can take a long time to process, so those marketing costs and the costs of processing cases often have to come from specialist funding providers.
Unfortunately, for a variety of reasons we have seen a number of solicitors who have found themselves in a the position of having more money owing than the fees that are due on the work in progress they have for their clients.
Just recently, a Liverpool-based law firm, McDermott Smith Law, known for handling high volumes of consumer claims, has gone bust. The firm’s latest financial records, covering the year ending 31 March 2023, revealed it owed a staggering £37.5m to creditors. This collapse follows a filing by litigation funder Fenchurch Legal to appoint administrators, with Andrew Hosking, Sean Bucknall of Quantuma Advisory, and Damian Webb of RSM UK Restructuring Advisory now managing the process.
The Solicitors Regulation Authority (SRA) intervened, citing an “insolvency event” at the firm, which specialised in cases like housing disrepair, motor finance, and business energy disputes. McDermott Smith’s rapid growth was evident in its accounts, with creditor debts soaring from £5.8m in 2022 to £37.5m in 2023, while staff numbers jumped from 24 to 69. Yet, only four solicitors, including founder Andrew Smith, were listed with the Law Society.
In May 2023, the firm secured funding from Katch Fund Solutions to support motor finance claims, a sector linked to the downfall of another claims firm, SSB Group, earlier this year. The rise of mis-sold pension and car finance cases has sparked SRA guidance on claims management.
The creditors and administrators will likely now look to find a new regulated company to take on managing their thousands of claims through to settlement, which will likely cause some delays and disruptions for their thousands of consumer clients who are waiting for compensation or financial redress.
Our Thoughts
Good quality financial mis-selling solicitors are increasingly in demand as there are lots of consumers seeking justice for losses they have suffered as a result of failures and negligence on the part of their Financial Advisers, Pension, Mortgage and Car Finance Providers.
For those consumers who lack the time, confidence or inclination to manage a claim themselves, the above firm’s collapse highlights that size isn’t everything and in fact, allowing a smaller team of experts can prove to be a safer proposition.
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