Get a signature on the dotted line or there is no contract, warns the Claims Management Regulator as tough new Conduct Rules for claims management companies (CMCs) are announced.
In response to consumer concerns that bad practice by some CMCs continues to plague the industry, the Regulator is set to introduce a number of changes.
This includes bringing an end to all verbal contract arrangements between consumers and CMCs and enforcing written contracts before any fee can be taken.
- Coming into force this summer the new rules will mean:
- CMCs must agree contracts in writing with their clients, before any fees can be taken;
- CMCs must refer to their regulatory status as being regulated by the claims management regulator - rather than the MoJ which till now could be misconstrued as MoJ and government endorsement; and
- CMCs must inform clients if they are suspended or restrictions imposed on their business within 14 days of the enforcement action being taken.
As part of the industry wide crackdown, the Regulator has – from April 1 – also banned inducement advertising by CMCs. No longer will companies be able to target consumers through advertisements which offer vulnerable individuals a cash incentive for signing up to use their services.
Head of Claims Management Regulation, Kevin Rousell said:
“Time and time again we see examples of consumers who have inadvertently agreed to a contract with a CMC without a written contract in place.
“I want people to have time to think through their arrangement and be happy and clear about exactly what the deal is before they part with any money.
“These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer.
“Enforcing new rules will help to drive malpractice out of the industry and improve the reputation for the vast majority of CMCs that do follow the rules.”
The Regulator is focused on improving consumer protection and ensuring all CMCs are complying with the rules. The CMR industry is continuously evolving and the rules must be constantly monitored.
Around 3,000 claims management companies (“CMCs”) are licensed to provide claims management services, with around 1,900 licensed for personal injury and 1,100 for financial claims; (some operate in more than one sector).
Personal injury is the largest sector but accounts for less than 5% (386) of consumer complaints. At 93% (8,521), the vast majority of consumer complaints are about CMCs providing financial claims services. The main focus of the financial claims sector is currently payment protection insurance (“PPI”) claims. Between April 2011 and March 2012, 260 CMCs had their licenses removed. Of these 66 were in operating in the financial products and services sector, which includes those operating in the PPI claims sector. It is a relatively small number of CMCs - around 15 - that prompt a significant proportion of consumer complaints.
Notes to editors:
- Read the full consultation and response
- Further information about the Claims Management Regulation unit
- Read the CMR annual report 2011/12
- For further information on unsolicited marketing calls and SMS texts visit the Information Commissioner’s Office (ICO) website