'No fee' claimants face shock bills
So many claimants are facing unexpected or illegitimate bills from "no win, no fee" law firms that the phrase should be abandoned altogether, a watchdog has suggested.
The Legal Ombudsman ordered compensation totalling almost £1 million last year and said the "fundamental promise" of the system - that success meant the client paid nothing - was being broken.
Its damning report blamed an "increasingly aggressive" market for encouraging firms not to vet cases properly and then to resort to "unethical practice" when they went wrong.
Some 600 of the cases the Ombudsman dealt with last year involved so-called conditional fee agreements where clients were wrongly hit with demands for "significant and unexpected costs".
Lawyers were "tempted to try and pass the risk to on to a customer or simply go back on the terms of the agreement to get out of a problem they created".
Others failed to explain complex contracts sufficiently clearly to clients, it said, warning that a new system introduced by the Government could worsen matters.
One victim was handed a £24,000 costs bill for a successful outcome to his case - despite the law firm having withdrawn and left him to represent himself.
The system was introduced in 1995 as a replacement for taxpayer-funded Legal Aid to enable people to afford to pursue civil claims such as car crash injuries, employment disputes or medical negligence.
Abuses were not yet widespread, the report concluded, but swift action was needed by professional bodies and regulators to ensure it was stamped out before it spread.
Chief Ombudsman Adam Sampson, said: "The 'no win, no fee' market has become increasingly aggressive, with many law firms competing for cases and sometimes prioritising sourcing a large number of customers over a careful selection process.
"A business model which consistently overvalues the chances of success can drive lawyers into unethical practice in order to avoid financial meltdown.
"This report raises genuine questions as to whether the 'no win, no fee' label should be used at all."
Warnings have previously been issued by the Advertising Standards Authority (ASA) about "misleading" commercials which fail to explain that clients can become liable for some costs.
The report said there was "little evidence" in the cases it examined that lawyers had explained to clients the full implications of complex "no win, no fee" contracts.
Many clients were not aware of reforms - designed to clamp down on spurious claims for whiplash and other injuries - which mean success fees and insurance is no longer recoverable from the losing party.
And damages-based agreements, which since April 2013 have allowed lawyers to reclaim a percentage of a successful client's payout, were "even more impenetrable to all but the most sophisticated and literate customer", it said.