‘Claim farmers’ are reported to the Danish police for violating the Danish Act on legal advice

According to the Danish Consumer Ombudsman four ‘claim farmers’ are to be considered as legal advisers and their business must be in compliance with the Danish Act on legal advice. This means that the ‘claim farmers’ are not allowed to receive payment on behalf of consumers subject to EU Regulation 261/2004 nor are the ‘claim farmers’ allowed to charge a fee to the consumers that constitutes a share of the compensation received.

The Danish Consumer Ombudsman has recently reported four ‘claim farmers’ to the Danish police that offer consumer assistance in relation to flight delay compensation subject to EU Regulation 261/2004.

In the opinion of the Danish Consumer Ombudsman, the ‘claim farmers’ have violated the Danish Act on legal advice and the associated Danish executive order on good practice for legal advice.
The Danish Consumer Ombudsman assesses that the ‘claim farmers’ offer legal advice and therefore must be in compliance with the Danish Act on legal advice.

In accordance with the Danish Act on legal advice the adviser has an obligation to inform about their fee – or the calculation basis for the fee – and the fee must not be calculated as a proportion of the dividend obtained in the case. In addition, the legal adviser is not entitled to receive trusted funds on behalf of the consumer.

On the ‘claim farmers’ websites – according to the Danish Consumer Ombudsman – the fee is calculated as a proportion of the compensation obtained. In addition, the four ‘claim farmers’ have a business model where the air carriers must pay the compensation to the ‘claim farmers’, who then deduct the fee before the remaining part of the compensation is paid to the consumer.

The Danish Consumer Ombudsman finds that the business models of the four ‘claims farmers’ are violating the Danish Act on legal advice. However, the ‘claim farmers’ do not agree with the Consumer Ombudsman’s assessment on this matter. In the opinion of the ‘claim farmers’, the business model of the ‘claim farmers’ is not subject to the Danish Act on legal advice, but instead to the Danish Debt Collection Act. If the latter should be the case, there will be no legal grounds for taking further legal actions against the four ‘claim farmers’.

Legal statement from the Danish Consumer Ombudsman

The Danish Consumer Ombudsman has stated the following:

“Anyone who is primarily engaged in legal advice and who is not a lawyer or financial firm must comply with the Act on legal advice”

“The law prohibits the adviser from accepting money on behalf of consumers, and it protects consumers from losing their money if the adviser goes bankrupt, for example. Therefore, it is important to clarify whether these companies are legal advisers or not.”

“In addition, the law also protects consumers from having to pay fees, the amount of which depends on the outcome of the case.”

IACOBUS Law’s recommendation

Based on the provided information on this matter, it is the assessment of IACOBUS Law that you could rightly argue that the four ‘claim farmers’ offer legal advice and therefore must be in compliance with the Danish Act on legal advice. This means that the ‘claim farmers’ according to the Danish legislation among other things are not allowed to receive payment on behalf of the consumer in relation to flight delay compensation subject to EU Regulation 261/2004.

Thus, it is the opinion of IACOBUS Law that air carriers based on the reporting to the police by the Danish Consumer Ombudsman should consider avoiding making any payment of compensation directly to the ‘claim farmers’ – or at least have a dialog with the particular ‘claim farmer’ regarding the business model of the ‘claim farmer’ before making any payment.

However, it is important to be aware that the four ‘claim farmers’ have only been reported to the Danish police in these matters. There has not yet been, according to the knowledge of IACOBUS Law, any indictment or conviction against the ‘claim farmers’ in question.

Until this matter is finally settled, IACOBUS Law recommends that air carriers refuse to pay any compensation to the ‘claim farmers’.  We recommend that the air carriers inform the ‘claim farmers’ that any compensation will be paid directly to the consumer. Should the ‘claim farmers’ protest against such payment, the air carriers might consider in such cases transferring the compensation amount to an escrow account created for the purpose and await any possible indictment and decision from the Danish court on this matter before making any payment of compensation either to the ‘claim farmer’ or the consumer.

From a legal perspective, the agreed fee between the ‘claim farmer’ and the consumer is only a matter between these two parties and of no relevance to the air carrier. That said, the informed fee to the consumer must of course be in compliance with the Danish Act on legal advice.

Finally, it should be mentioned that law firms are exempt from the Danish Act on legal advice. This means that law firms may receive payment on behalf of the consumer subject to EU Regulation 261/2004.