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No decision on ‘fake firm’ investigation from SRA

9th Feb 2015

The Solicitors Regulation Authority (SRA) has yet to decide whether to pursue disciplinary action against in-house lawyers writing misleading letters for debt recovery.

Eight months ago the SRA received its first complaints regarding companies sending out debt recovery letters to customers under different names, those of law firms which did not exist. Wonga, the payday lender, was widely criticised, but now City of London Police have stated that there is not sufficient evidence to bring criminal charges against the company.

Once news of Wonga’s dealings had been broken last July, the SRA received complaints of other companies using the same practice. Instead of sending out letters from their own firms, notices were sent giving the impressing of being from an independent solicitor. These independent firms were then revealed in the small print to be created and run by the original companies, which led to complaints that in-house solicitors had breached the code of conduct.

Now the SRA has admitted that it is ‘facing its own challenges’ in attempting to decide whether any solicitors should face action. Jane Malcolm, executive director of the SRA, has said that they are continuing to look at these issues, but no decisions have been made yet as ‘they are less than straightforward’.

As well as Wonga, last summer Lloyds Bank was found to have sent letters to customers under the name of ‘SCM Solicitors’, a company which turned out to be in-house. HSBC and RBS also admitted to adopting such a practice in aiding them with debt recovery in letters to the Commons Treasury Select Committee. Barclays and Santander stated that they had also previously used separate brands to undertake in-house debt collection.

After the news had broken, the SRA proceeded to warn in-house solicitors about ‘taking unfair advantage’ of customers who did not possess expert legal knowledge during the debt collection process.

As no qualified solicitors were involved in the ‘law firms’ managed by Wonga, it was decided that the case was not a matter for the SRA. Last summer, the firm was ordered to pay £2.6m in compensation to around 45,000 customers.