Lord Falconer, the Secretary of State for Constitutional Affairs, has slammed dubious claims farmers who are touring south Yorkshire to sign up claimants and then leaving them with massive bills from loan sharks.

Lord Falconer said he had uncovered an "absolute scandal" whereby suspect claims farmers lure new clients with the promise of substantial pay-outs upon winning cases through the courts.

According to Lord Falconer potential clients are sought via the employee details of closed down factories, such as textile warehouses.

They are approached and told they have a possible claim for potential health issues, such as noise pollution. Once signed up to the process, they are persuaded to take out an inflated insurance premium in the event that they lose the case and are left with huge court bills.

Vulnerable claimants who are unable to afford the premiums are encouraged to take out loans at enormous interest rates.

Of those several hundred embroiled in the scandal, Lord Falconer said only one had since heard from the claims farmer about the progress of his case. The remainder only receive letters from the loan sharks.

He cited these claims companies as the type that the Compensation Bill wanted to remove from the system.

"If we don't regulate, advertising will be able to continue, and we will end up in a situation where this kind of misconduct can go on," said Lord Falconer.

"People will be left with no compensation, no help and a big loan bill to pay."