High Court gives green light to claim against financial mis-selling law firm

The case initially arose after Vanquis Bank issued a claim against TMS Legal, claiming the Bournemouth-based solicitors had caused loss by unlawful means by its “reckless” pursuit of thousands of complaints against the bank for financial mis-selling.

The court heard that between October 2022 and August 2024, TMS, which specialises in filing financial mis-selling claims, issued 33,000 complaints alleging “unaffordable lending” against Vanquis, which specialises in "second chance" lending to individuals with low or adverse credit histories. Around 84% of the 12,250 cases that were referred to and considered by the Financial Ombudsman Service (FOS) were either subsequently withdrawn, closed or rejected.

As a result of handling numerous "unmeritorious claims", Vanquis told the court it had spent around £2.8 million on additional temporary members of staff, approximately £930,000 a year on wasted management time, paid over £9m in fees to the FOS and lost profits of at least £270,000. The bank argued that TMS, which is regulated by the Solicitors Regulation Authority (SRA), had failed in its duties to clients in the submission of complaints.

TMS applied to the High Court to strike out the claim, Although the court determined that the facts of the case are “novel”, it found that Vanquis’ argument was based on the established principles of the tort of “causing loss by unlawful means”. Mr Justice Jay said the claim could potentially succeed on the facts if they were established at trial.

Vanquis argued that TMS had failed in its duties to its clients in the submission of complaints. It placed particular reliance on the pro forma nature of TMS’ correspondence, arguing that the firm failed to conduct proper merits assessments. The court heard that TMS requires clients to complete a basic online form or questionnaire, but said this does not seek, for example, proof of credit card ownership or information about affordability checks.

The court also had to consider whether TMS’ actions interfered with Vanquis’ actions. The judge was open to the possibility that they did. Vanquis’ position was that the submission of an irresponsible lending complaint led directly to the bank suspending credit to that customer as a result of its regulatory responsibilities.

Vanquis’ case is that it is standard industry practice for lenders to suspend credit after receiving a complaint. It maintains that TMS knew this was the bank’s practice from as early as January 2023, but the firm continued to submit unmeritorious complaints. In these circumstances, Mr Justice Jay agreed that it could be construed that there had been an “unbroken chain of causation” between the acts of TMS and their consequences.

Commenting on the case, Jacob Hay, civil litigation specialist at Pinsent Masons said: “The fact pattern will be familiar to many lenders: TMS had “inundated” Vanquis with claims alleging irresponsible lending,” he said. “Reviewing the ingredients of the tort, Mr Justice Jay had no difficulty in holding that the facts alleged by Vanquis would – if proved – evidence unlawful acts by TMS vis-à-vis their own clients.”

Given the case is still at a preliminary stage, the judge cautioned that his ruling should not be interpreted as a comment on whether the financial mis-selling claims had in fact been improperly brought. However, he said he was satisfied that Vanquis should be permitted to attempt to prove that TMS knew that its actions had the “virtually certain consequence” of loss for the bank. There will be a further case management hearing in due course to make directions leading to a trial. A full assessment of the evidence in the claim will only happen at a later date if a trial does take place.

In the judgment, Mr Justice Jay underscored that part of the reason for the novelty of the claim was that it could only arise on “egregious” facts. He said: “The reason why this sort of claim has not been brought in the past is that for various reasons it can only stand a chance of succeeding on egregious facts. If Vanquis's case is right, this would be an example of egregious conduct by TMS.”

Hay said the case was evidence of a potential new legal avenue for businesses to seek damages resulting from claims management firms’ conduct. “In what might be seen as something of a warning shot for the claims management industry, Mr Justice Jay commented that ‘[i]f Vanquis’s case is right, this would be an example of egregious conduct by TMS’,” he said.

This development follows a warning notice issued by the SRA in May 2024 highlighting concerns over the professional conduct of claimant law firms working on mass claims against financial services organisations. “Regulated firms of solicitors who engage in high-volume financial service complaints are already on notice of the SRA’s concerns in this area, and the strength of language used here could cause significant further interventions if the type of behaviours Vanquis allege are found to exist,” said Hay.

The case is also particularly noteworthy for businesses dealing with high-volume complaints. “This judgment strikes a potentially important blow against some of the more questionable practices exhibited in the claims management company (CMC) and professional representative space – particularly the harvesting of unmeritorious mass complaints, with a view to leveraging the weight of FOS case fees to compel firms to settle complaints, even if they’re likely to win before the FOS,” said Anthony Harrison, a regulatory specialist at Pinsent Masons. “That is not to say that all CMCs behave unscrupulously – and the allegations in this case remain to be substantiated one way or another – but this judgment forms part of a wider ‘check and balance’ on professional representatives, following hot on the heels of the FOS’s recent policy of charging professional representatives £250 to refer a case to it from 1 April 2025.”

The case may also impact assessments concerning FOS jurisdiction as they relate to time limits given Mr Justice Jay’s comments in relation to TMS’ “confirmation statement”, which prompted prospective clients to endorse the following wording: “I only recently understood that I had cause to complain when [TMS] represented my interest regarding irresponsible lending...” Mr Justice Jay noted that the “statement is entirely leading and that clients should not have been asked to sign it in these terms.”

Harrison said professional representatives would be mindful to take such judicial comments on board. “I suspect there will be many who use sign-on paperwork that includes similar wording,” he said. “Whilst such wording might previously have been enough to meet the DISP three-year time-limit requirements – that a complaint could fall within FOS jurisdiction so long as the complainant only became aware of cause for complaint less than three years before it was referred – confirmation statements of this kind may be subject to more robust scrutiny by FOS and further challenge by respondent firms.”