The Referral Fee Racket
If you have had the misfortune of suffering a road accident, the last thing you want is to be pestered by some claims management company asking you whether you want to make a claim and then bombarding you with texts and e-mails. The pressure can be relentless and it is not uncommon for false claims to be made such as “you may be entitled to up to £3750” in compensation which is absolute nonsense as no-one can say what kind of money you may be entitled to without knowing what your injuries actually are.
So, how do these companies get hold of your details and how can they do this bearing in mind that our personal information should be kept private under the Data Protection Act.
The answer is simple in that the insurance companies, garages, breakdown companies and even the police are all in on the “racket” of selling your details to these companies for which they are paid a “referral fee” which can be many hundreds of pounds. Indeed, one police force is reported to have made £1.3 million in just one year in “fees” that it charged to vehicle recovery companies for tipping them off about accidents.
The former Minister of Justice, Jack Straw, has finally woken up to this “racket” despite the fact that it has been going on for years unchecked and without any proper regulation. It is a pity that it is only now that Mr. Straw has decided to take up the issue when as Minister of Justice he could have and should have done something about it then.
The way the Claims Management Companies work is that they then sell details of your claim on to a firm of solicitors who then deal with your claim. Most the time you are given no choice upon who is actually instructed and you can end up with a solicitor at the other end of the country with nobody who is able to speak Polish or communicate with you at all.
In most road accident cases, the amount of fees a solicitor can charge is fixed and in many cases the solicitor will end up paying than half of this over to the Claims Management Company. This means that firms are under pressure to settle as many claims as quickly as possible in order to make a profit resulting in speed instead of accuracy.
This is one of the reasons that LJ Jackson has, in his review of legal costs, suggested a ban on these “referral fees”. But until that happens I would urge you to ensure that anybody you instruct is able to effectively communicate with you on all aspects of your claim and offer proper legal advice that you can understand. Only then, can you make an informed decision about your matter. If you chose to ignore your solicitor’s advice, that is one thing. If your solicitor does not advise you in the first place, that is negligence.
I am a personal injury lawyer and I am so ashamed and incensed by these practises that I am actually going to write to my local MP to urge him to take action to ban these referral fees. I will let you know what response I receive.