Compliance at scale: Managing volume consumer claims

With many anticipating a wave of PPI mis-selling claims on the horizon the question of how to effectively manage volume claims cases while staying compliant and secure will be of increasing importance to legal teams over coming months. So, how can firms begin to build a strategy for delivering volume claims? Claire Van Der Zant writes for Law360. 

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There is growing anticipation that a wave of volume consumer litigation comparable to what was witnessed with PPI mis-selling, could be about to hit UK courts. This time, the cases relate to the mis-selling of car finance. This prompted the Solicitors Regulation Authority (SRA) to issue a warning to the UK legal sector in May. The SRA raised a number of concerns about how firms handle volume claims and the potential for consumer harm. 

Volume consumer claims are a growing phenomenon in the UK and misselling scandals have seen millions enter proceedings against corporates ranging from train operators accused of over-charging passengers to Volkswagon and BT Group PLC.

According to law firm CMS’s European Class Actions Report 2023 – the most recent figures available - the value of UK class actions grew by a third, from £77bn ($97.7 billion) in 2021 to £106bn (£134.5 bn) in 2022.

This is good news for consumers who are increasingly able to collectively hold the corporate world’s feet to the fire and discourage misselling and other malpractice. It is also good news for the law firms for whom these actions represent a lucrative and growing market.

Class action lawsuits are a relatively new thing in the UK however. This means that, unlike teams in jurisdictions like Australia and the US, the infrastructure to successfully deliver volume consumer claims is still being refined.

The SRA guidance is highly timely therefore and, with more than £38 billion paid to PPI claimants since that scandal broke, it is clear to see why the SRA is anxious that claims are handled professionally, and claimants treated fairly.

So, what can organisations handling volume cases do to ensure justice is served for claimants, and law firms exit a claim with a reputation for competency, without falling foul of the SRA?

Claimant communication is key 

As a regulator, the SRA’s focus is squarely on ensuring customers of the UK legal sector are treated fairly and this latest intervention should be in seen in the context of the regulators’ broader Consumer Protection Review, which is expected to conclude later this year.  

The SRA’s warning notice makes clear that better claimant communications are key to this. To complicate matters, the SRA also urges firms to “treat clients as individuals, not just a number within a group” in their communications.

When dealing with thousands or even tens of thousands of claimants however, delivery is not without its challenges. The scale of volume cases, and the long timeframes over which a case plays out, means that communications can get lost in the mix, leaving claimants uninformed, misinformed or even forgotten.

Steps Firms Can Take

There are certain steps firms can take however, to ensure that claimants remain informed and regularly updated on the progress of a case.

Introducing claimants to key partners helping deliver the case is beneficial in terms of treating claimants in a way that is aligned with regulatory expectations. A communications plan should also anticipate the likely questions claimants may ask, have clear answers and a clear process defined for the escalation of incoming inquiries.

Know your claimant

Another set of issues identified by the SRA surround compliance, due diligence and consumer consent. As with good communications, volume brings challenges when it comes to due diligence and compliance.

In its warning to the legal sector however, the SRA alluded to consumers being represented in claims to which they have not consented as well as poor due diligence and firms failing to act on client instructions.

The SRA guidance tells firms to communicate with claimants “clearly, giving them a proper assessment of their specific case and related decisions to be made, and asking them for consent before taking any actions in their name.”

Alongside a communications strategy, it is clear that firms handling volume claims will also need a strategy when it comes to compliance. Central to this will be good data management and, prior to that, undertaking the necessary due diligence to ensure that all relevant data is collected.

Gathering payment information will be crucial, as any errors could lead to misdirected payments, financial losses and possible regulatory breaches.

Developing a process to acquire accurate payment data will ensure that, post-settlement or award, claimants can be paid effectively, without error and that the most appropriate payout method can be identified early.

Collecting this data in a case that involves potentially thousands of claimants, brings a significant degree of risk. Not only the risk of data inputting and processing errors which could lead to problems with fund distribution and claimant communication but also the risk of data falling into the wrong hands.

With significant sums of money at stake, there is every reason for bad actors to target volume claims processes which could have significant reputational and regulatory implications for a firm. It is crucial that firms develop a data robust policy that keeps client data secure and up to date.

Collecting data via email or through a standard web form is a high-risk strategy, unless supported by enhaced security protocols, such as end-to-end encryption, to ensure compliance and safety are maintained throughout. This is especially the case in light of the warning shots being fired by the SRA on consumer protection.

Allocating resources

Firms involved in volume claims will also need to think carefully about resource allocation and ensuring they have the teams and capacity necessary to discharge justice while also meeting the expectations laid out by the SRA.

This is especially the case with, for example, car finance mis-selling claims which are growing in prominence in the UK. 

Unlike some mass claims which involve a large, though singular, batch of claimants, car finance claims are likely to see an ongoing stream of claims over the long-term. So, for firms to manage these claims, work-streams will have to be built which can manage claimants, report on progress and handle data and compliance over the medium to long term.

Conclusion 

Whether car finance mis-selling becomes the new PPI remains to be seen. What is clear however is we are likely to see growing numbers of volume claims in years to come. From the EU’s Representative Actions Directive to automatically opting classes of consumers into a proceeding, regulators and legislators are making it easier for consumers to seek redress for mis-selling.

Handling these volume claims will bring new challenges for law firms in terms of compliance and claimant satisfaction, all of which could ultimately impact on a firm’s reputation and possibly the outcome of the case. It is crucial that firms heed the words of the SRA now, recognise the changes that need to be made in preparation and ensure they are on a good footing for when the next mis-selling scandal hits the headlines.

This article was first published in Law360 - read online here. 

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