Press release

Hundreds of rogue claim firms closed

Almost 600 of the claims companies responsible for bombarding people with nuisance calls and texts have left the industry.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Lord Faulks

The latest figures show that more robust enforcement against claims management companies and stricter rules raising standards are having a dramatic effect. The number of firms who are regulated to handle compensation claims, for example for personal injuries or mis-sold financial products, including PPI, has fallen from 2,693 in April 2013 to 2,097 in March 2014.

The fall has come as the government has introduced tough new rules to prevent bad business practices as well as increasing regulation fees, and is introducing large new fines, of potentially hundreds of thousands of pounds, for companies which break the rules.

This follows previous reforms to tackle rogue firms, including a ban on companies offering cash and other incentives to consumers to bring claims and the banning of ‘referral fees’ which used to be paid between no-win no-fee lawyers, claims firms and others for profitable claims.

Kevin Rousell, head of the Claims Management Regulation (CMR) Unit said:

We have made it very clear to businesses that we take a zero tolerance approach to any malpractice or attempts to take advantage of victims of crime.

Our changes have made a clear impact, for the benefit of consumers.

But no regulator can ever stand still and we are going further. The new fines we are introducing this year will give us the power to impose tough sanctions on those firms that flout the rules with much more precision, power and proportionality than ever before.

The figures are included in the annual report of the CMR unit at the Ministry of Justice (MOJ), which is responsible for regulating the companies that advertise for claims and handle them on behalf of people pursuing compensation for injuries, as well as other issues like mis-sold financial products and services.

Justice Minister, Lord Faulks said:

We have made major reforms to turn the tide on compensation culture, drive down insurance premiums and help honest people.

What we have already seen is that this has had a significant impact on the amounts people are having to pay and the departure of a large number of claims companies will be welcomed by many.

In May, the first 2 independent non-executive board members - Carol Brady and Caroline Wayman - were appointed to the executive-led CMR Board. These appointments represent a greater element of external challenge to help ensure continuous improvement.

Notes to editors

  • In February 2012, the Prime Minister, David Cameron pledged action to tackle high insurance premiums following a summit with the insurance industry, where insurers committed to pass on savings to their customers. Since then MOJ has:

    • Transformed no win, no fee deals so lawyers can no longer double their fees if they win, at the expense of defendants and their insurers
    • Banned ‘referral fees’ paid between lawyers, insurers, claims firms and others for profitable claims – which have driven the growth of compensation culture
    • Reduced by more than half the fees lawyers can charge insurers for processing basic, uncontested claims for compensation for minor injuries suffered in road accidents – from £1,200 to £50
    • Banned claims management companies from offering cash incentives or gifts to people who bring them claims. Recommend a friend deals also banned, along with contracts agreed only over the phone
    • Changed the law so that regulated claims companies which breach Claims Management Regulation rules around cold-calling and client service will be liable for fines of hundreds of thousands of pounds (as well as the existing sanctions of being suspended or closed down)
    • Introduced proposed law changes currently being considered in the Criminal Justice and Courts Bill which will also ban law firms from offering incentives to potential clients and allow the courts to throw out entirely any compensation case where part of the claim has been proved to be fundamentally dishonest
  • View the full Claims Management report

  • Find out further information about the Claims Management Regulation unit

  • View the latest quarterly Claims Management Regulation Unit enforcement update

  • For further information please call the MOJ press office on 020 3334 3536. Follow us @MoJpress

Published 18 August 2014