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Law firm in threat to sue lender Cattles
A LAW firm has piled more woe on Cattles by threatening to sue the sub-prime lender for allegedly misselling loan insurance policies.
London-based Leon Kaye Solicitors has been appointed by an unnamed City institution to launch a class action against the lender for misselling payment protection insurance (PPI), mischarging for it and failing to honour insurance claims.
Cattles, whose shares are suspended, lends to customers with patchy credit ratings who struggle to access credit from high street banks.
No figure has been put on the total sum that could be claimed, but senior partner Leon Kaye believes there could be "huge sums" at stake. "They (the City institution) consider claims made so far are only the tip of the iceberg," he said.
Cattles is struggling to secure its future and labouring under a debt burden last reported to be 2.4bn. The group is trying to persuade bondholders to subscribe to a standstill agreement, which would give it breathing space to restructure.
Regulators including the Financial Services Authority are understood to be probing former directors, and accounting watchdog the AADB is investigating its auditor PricewaterhouseCoopers.
Cattles sold or closed a number of marginal businesses, and warned of backdated impairment charges of up to 850m.
Leon Kaye also represents thousands of Bradford & Bingley and Royal Bank of Scotland shareholders in their fight over being persuaded to participate in the banks' rights issues. The firm believes despite Cattles' financial problems, it has a good chance of winning compensation for customers.
Although it has suspended lending to new customers, Cattles previously sold PPI alongside loans. The controversial insurance is designed to cover a customer's repayments if they are unable to make loan repayments for reasons such as illness, redundancy and death.
Sales of PPI previously made up about 10 per cent of Cattles' annual earnings – about 80m.
"We are working towards being in a position where we can submit a claim either on behalf of individual policy holders or on behalf of a large group of customers," said Mr Kaye.
He said the firm will gather evidence of complaints such as overcharging for PPI policies, customers being misled into purchasing the insurance, and claims not being honoured.
It is unclear whether a class action would take priority over claims by the group's banks and bondholders. These creditors are locked in discussions over who has first call on the group's assets in an administration scenario.
Mr Kaye said based on the success rate of cases that are referred to the Financial Ombudsman Service (FOS), he believes there could be grounds for a significant class action against the group. He added the firm will also consider claims against other sellers of PPI.
Plans by the Competition Commission to regulate the PPI market were recently dealt a blow after a legal challenge by Barclays. The watchdog had hoped to ban PPI at the point of sale, thus giving customers more time to shop around.
But a tribunal told the Commission to reconsider its plans for imposing a seven-day delay before PPI can be sold.
Cattles declined to comment.
Specialist leads the way
City law firm Leon Kaye Solicitors has a track record of leading class actions, representing a large number of people, against big companies.
Earlier this year the firm took on Bradford & Bingley and its directors over claims the former bank misled shareholders to participating in a 400m rights issue just before it collapsed.
It also launched a class action against the Royal Bank of Scotland, arguing the bank "wilfully misled" shareholders into participa-ting in a 12bn rights issue. The bank subsequently had to be bailed out by the Government.
Founder Leon Kaye has experience of class actions in annuities, endowments, pensions and shareholders' actions.
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Thursday 24 May 2012
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