Investigation by Ruth Alexander and Karen Kiernan
BBC Radio 4's Money Box
Ex-staff say many customer files sat in boxes "gathering dust"
Millions of pounds of customer money may be at risk following the forced closure of a law firm used by a major claims management company.
Consumer Credit Litigation Solicitors (CCLS) handled tens of thousands of cases on behalf of Cartel Client Review (Cartel).
CCLS was shut down this week by the legal watchdog, the Solicitors Regulation Authority.
Last month, BBC Radio 4's Money Box revealed both firms were being investigated following complaints from customers. The Ministry of Justice investigation into Cartel continues.
Cartel offers to process financial claims against lenders and credit card companies on behalf of customers, based on flawed credit agreements.
Most customers were assured of a resolution to their case in 6-12 months, and if their claim was unsuccessful they would get their money back.
It is understood that Cartel has processed over 70,000 claims, but hundreds of customers have told the BBC their debts remain and that they have not received refunds as promised.
One customer said he had paid more than £10,000 to Cartel over two years ago but had heard almost nothing about most of his claims, and received no refund.
Cartel passed all its claims to CCLS for detailed assessment.
The SRA said it had acted to protect clients of CCLS because of "suspected dishonesty".
MD Carl Wright said Cartel has stopped taking new business
A spokesman said it was worried that the relationship between Cartel and CCLS was too close and might be against the best interests of the customers.
Cartel and CCLS insiders have told the BBC that the two firms operated out of the same office building in Manchester, at one stage even operating on the same floor.
The managing director of Cartel, Carl Wright, is thought to have had a lot of influence over the law firm.
A former CCLS employee, Colin Power, who now works for a competitor, said almost all the mortgage claims he assessed for the firm had no reasonable prospect of success. But he said staff were not allowed to tell clients they had no claim.
Mr Power said that if the legal team assessed a file and found there was no basis for a claim, their file would be passed on to a "special review and investigations team" for yet more analysis.
But he said he saw no evidence of results from this process:
"These files were just left in an office, gathering dust."
A Cartel spokesperson denied this, and likened the service to a production line with many stages of process. Taking a toothpaste factory as an example, the spokesperson said that a tube of toothpaste would not be considered finished if it did not yet have a lid on it.
But other former employees confirmed Mr Power's version of events to the BBC.
Some said thousands of files were never looked at properly, because there were not enough staff.
The SRA said CCLS was the biggest law firm they have ever shut down in terms of case volume.
Cartel denies that files have been left neglected
Customers have paid money to Cartel, not the law firm, so the SRA are unlikely to be able to help with refunds.
Perhaps the best option they have is a rather ironic one.
The Ministry of Justice said customers who have paid Cartel on their credit card could seek compensation from their credit card company, if they have not received the service they paid for in a reasonable amount of time.
One woman who paid several thousands of pounds to bring claims on her mortgage and credit card debts told the BBC she and her husband now feel foolish.
"We thought if there was a loophole this might help. But you sort of feel embarrassed and you feel greedy and stupid that you've done it."
Customers have paid out large amounts of money and got very little for it, yet Mr Wright paid himself £790,675 from Cartel Group Holdings in the financial year ending September 2008.
It is understood that staff at CCLS and many at Cartel have not been paid in February and March, although a spokesperson denied that.
According to accounts filed at Companies House, if Cartel were to go into liquidation, Mr Wright would be first in line for any payouts, forensic accountant David Winch told the BBC.
Mr Wright holds a charge over the company's assets and would have to be paid what he was owed before any customers are paid what they are owed, he added.
Cartel denies that files have been left neglected. Meanwhile, Mr Wright has issued a notice to Cartel sales agents, saying that the company is "temporarily putting a hold on all new Cartel business" - while he considers "what Cartel does next".
While the company is still being investigated by the Ministry of Justice, a number of customers say it should have been shut down with CCLS.
The Ministry of Justice said it could not comment on an active investigation, as that might jeopardise the outcome.
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