The move by the Ministry of Justice comes as fears grow over an estimated £30m paid by clients of one of the biggest claims handling companies, Manchester-based Cartel Client Review.

Since Cartel started operating in 2007, around 70,000 clients have each paid it a minimum of £495 to have their loan agreement scrutinised, with further payments of up to £175.

Cartel promises to refund some of this money if a claim is unsuccessful or abandoned on technical grounds. But Cartel refuses to say how many cases it has won and how many clients have received their money back.

On March 10, the Solicitors’ Regulation Authority closed down Cartel’s legal firm, Consumer Credit Litigation Solicitors (CCLS). Meanwhile, the Ministry of Justice is investigating Cartel.

Carl Wright, chief executive of Cartel Client Review, says:

‘Cartel is currently reviewing the outcome of discussions which took place on Monday, March 15, with the Ministry of Justice.’

The £100 m debt write-off industry has attracted around 200,000 customers, lured by the promise that their borrowing could be classed as ‘unenforceable’. An unenforceable debt cannot be collected. This is usually because a county court judge has ruled the original contract was drawn up incorrectly

But some firms have been accused of sucking consumers in by making false claims about the likelihood of getting a debt rendered unenforceable.

Now the industry regulator at the Ministry of Justice is drawing up plans to force firms to ringfence deposits and fees paid by consumers so that they can be refunded if a case is not investigated. And it wants the companies to abide by tough Advertising Standards Agency rules that mean if a firm says it has won ‘many’ or even ‘some’ cases then it must produce evidence to back this up.