No Win No Fee – a Help or a Hindrance?

Bank customers getting assistance from 'no win no fee' lawyers because of overcharging has sparked debates on the necessity of legal help.

Reports from banks show a large increase in customers attempting to claim back charges that were made for going overdrawn. However, some firms acting on the customers behalf have been taking up to 25% of reclaimed money.

A Which? Spokesperson said: “There's no reason to use a claim handling firm for bank charges.

“They have no extra powers or persuasive abilities and we've heard of some firms taking between 20% and 40% as fees. If you can do this process yourself, why give away almost half of your money?”

The claim handling industry argue that their clients prefer additional help with administrative tasks such as filling in forms for the small claims court.

Philip MacDonald, managing director of Phoenix Financial Recovery, said: “If you are confident and have that kind of personality, then you can win it back yourself.

“However we think there’s a reasonable niche market of people who don’t want to have to issue a court summons or deal with it, and would rather have someone to hold their hand through the process.”

Banks have tried to find fault with applications leading to them being thrown out and they routinely make smaller offers added Mr MacDonald. Incorrectly filled in forms could lead to cases going to court when they do not necessarily need to.

Despite this the advice from the British Bankers Association is to contact the bank.

Lesley Mcleod, director of retail at the BBA, said: “There's no need for an intermediary.

“The best thing for a customer to do if they have a complaint or query about fees is to get in touch with the bank themselves.”

'No win no fee' contracts are a kind of conditional fee agreement that is traditionally associated with injury claims but now has a wider scope such as claiming damages from banks.

With this type of contract a solicitor will help form a case for their client and, should they win, the legal fees incurred are paid by the opponent. However there could be other charges that the client has to pay if the case is successful. These might include payment for reports from experts consulted during proceedings and advice from other legal experts.

If a case is lost a client will not normally pay anything to their solicitor but will have to cover the legal fees of the opponents lawyer. They may also have to pay for their own costs and expenses.

Clients can protect themselves from some costs by taking out Legal Expenses Insurance. This comes in two types: Before the Event Insurance and After the Event Insurance.

Before the Event Insurance is paid as a monthly premium along with an insurance policy. Should an event happen needing legal help expenses are usually covered.

After the Event Insurance covers costs should a client lose their case. It is offered to those following the event and would ensure that those making the claim are not liable for the opponent's legal fees because their insurance company would pay.