In future complaints about claims firms will be handled by the Legal Ombudsman, which holds powers to force companies to pay compensation or provide other forms of redress.
The change planned for next year will mean the Claim Management Regulation (CMR) unit at the Ministry of Justice will also be able to dedicate more resources to tackling bad practice by companies in the sector, which specialise in helping people make claims for compensation for accident injuries and mis-sold financial products like Payment Protection Insurance (PPI).
The tough new move is the latest stage of the Government’s work to bring bad claims companies into line, which already includes:
- Giving the CMR unit new powers to fine firms which breach rules and adding more enforcement staff.
- Stopping firms from taking fees from customers before a contract has been signed.
- Naming firms online which are subject to enforcement action or under investigation.
- Changing the law for no-win no-fee deals and banning referral fees paid to middlemen – which has led to almost 1,000 firms closing down.
- Banning companies from offering cash or gifts for profitable claims.
Justice Minister Shailesh Vara said:
“Consumers should be in no doubt that the bad companies out there are being dealt with. We have already ended the licenses of more than 1,000 companies and tough new powers are now being brought in across the board.
“This latest change will make sure people who get a bad service can get redress.”
Legal Ombudsman Adam Sampson said:
“This announcement is great news for consumers who will soon have access to redress where they have experienced poor service from claims management companies. It is also good news for claims management since it will boost confidence in the services provided by the sector. The Legal Ombudsman will be ready to start accepting complaints as soon as legislation allows.”
The law is being changed through the Financial Services (Banking Reform) Bill to enable the Legal Ombudsman to start handling claims management complaints. The Bill is currently progressing through Parliament and had its Third Reading in the House of Lords on Monday 9 December 2013. It is expected to receive Royal Assent by early next year.
The Ministry of Justice and Legal Ombudsman have begun working towards the change, planned for later in 2014.
The Bill will also create new powers for the Claims Management Regulation unit to fine companies which use information gathered by unsolicited calls and texts or who provide poor quality services.
The fines will be used alongside new tougher rules for claims management firms, which include requiring firms to carry out thorough audits of how data they use has been gathered, so they can no longer turn a blind eye to whether leads have been found by illegal marketing texts and calls. They will also have a duty to make sure the claims they are submitting have a realistic chance of success, as well as ensuring full evidence is provided to back up any allegations.
Notes to editors:
The law changes are included as amendments to the Financial Services (Banking Reform) Bill 2013 (for more information about other aspects of the Bill contact HMTreasury press office on 0207 270 5238).
For more information about the Claims Management Regulator visit and the new conduct rules.
View details of live investigations and enforcement action against claims management firms.
See more information about the Legal Ombudsman.
For further information please call the Ministry of Justice press office on 020 3334 3536. Follow us @MoJpress.