Lloyds Bank gets praise after being accused of flooding law firm with letters

One of the biggest mortgage lenders in the country has come under fire from lawyers and been praised by Daily Telegraph readers while simultaneously helping keep the Royal Mail in business.

Lloyds Bank, which has been in the headlines for its potential exposure over a lending commission court case -  has now been criticised for allegedly inundating a legal firm with enormous volumes of mail.

Courmacs Legal, representing drivers looking for some kind of payoff after the Court of Appeal ruled that the way sales people had been paid commissions was unlawful, reported receiving “tens of thousands” of letters daily from Black Horse, Lloyds’ motor finance division, while most other lenders opt for electronic correspondence. 

Darren Smith, managing director of Courmacs Legal, described the situation as overwhelming. “We receive cages of post. We’ve gone from having the conventional post van that arrives at your house to a large transit van,” he said. “We now get our post delivered by a truck from the Post Office because they are trying to swamp us out with post.”

Despite the law firm’s outrage (and free publicity) it would appear that Telegraph readers have very little sympathy for the law firm or complainants. “Most customers were perfectly happy with their car finance deal, otherwise, why did they proceed with it? Lawyers have created this mess, so it’s no good their complaining when someone uses their own tactics on them,” said one reader – while most others also left comments supporting Lloyds’ actions.

The law firm claims that last week alone, Black Horse sent them approximately 200,000 letters, at a law firm estimated cost of £250,000 in postage, printing, and legal expenses. Lenders are obligated to acknowledge complaints from drivers alleging hidden commissions on car finance agreements, but most have moved to email for efficiency. Mr. Smith asserted that Black Horse’s reliance on physical mail is a deliberate tactic to slow down the legal process.

“They’re not being co-operative or trying to actually assist anyone who’s trying to help the consumer,” he added. “It seems their mindset is: if we can swamp them out with post, well, that’ll keep them quiet.” 

The allegations emerge as Lloyds, one of the UK’s largest car finance providers, faces mounting pressure from the motor finance mis-selling scandal. The crisis, stemming from a Court of Appeal ruling that lenders failed to secure informed consent from borrowers regarding commission payments, could cost the industry an estimated £16 billion. Lloyds has already allocated £450 million to address potential compensation claims. 

High street lenders have been deluged with complaints following the ruling, which highlighted widespread failures in transparency between car dealerships and loan providers. The fallout has caused billions to be wiped off banks’ market values and has left major lenders struggling to process compensation claims.

A spokesperson for Black Horse defended the mail strategy to The Daily Telegraph, stating, “We are required to acknowledge every complaint that we receive. Currently, the best way to do this quickly is to issue a letter back to the claims management company, so it can be easily forwarded on. However, we always recommend that customers contact us directly via our website, where they will find all the information they need to raise a complaint with us directly.”

Read more: New Court of Appeal decision could expose multiple lenders to billions in losses

Rachel Reeves has already said that she intends to look at streamlining the regulators’ complaints-handling process and alleviate pressure on the FOS, which dealt with over 200,000 cases last year—a number that has risen by 50% over the past 12 months.

In a move designed to deter frivolous claims, the FOS announced plans to charge a £250 fee for cases submitted by professional representatives, such as claims management companies, after the first 10 filed in a year. If a claim is successful, the fee will drop to £75. Ordinary consumers will continue to have free access to the service. 

Despite this, Lloyds is reportedly exploring solutions with Blackburn-based Courmacs Legal to transition correspondence to electronic formats. Meanwhile, the Blackburn-based law firm has invested in specialised equipment to handle the influx, including machines to open and scan letters, assign them to the appropriate case files, and notify the relevant lawyer.

Mr. Smith said, “What should be a process for slowing down the system, we cope with quite well, but that was an investment on our part to make sure we can deal with it.”

Elizabeth Comley, chief operating officer at Slater and Gordon, has also claimed that some lenders are “really dragging their heels” in providing necessary financial records, resulting in a “massive backlog” of unresolved cases. The Financial Conduct Authority has since granted motor finance companies additional time to address the surge in complaints.