Firms will no longer be able to start acting for someone based on a phone call alone – in future they will have to have a signed contract before they can take any fees.
The change is one of a series made by the Ministry of Justice’s Claims Management Regulation Unit in response to consumer concerns.
The rules which came into force on 8 July mean:
- CMCs must agree contracts in writing with their clients and this must be done before any fees can be taken.
- CMCs must refer to their status as being regulated by the Claims Management Regulator, and not the MoJ – in the past firms have misrepresented their status as a government endorsement.
- CMCs must inform clients if they are suspended or if restrictions are imposed on their business. This must be done within 14 days of the enforcement action being taken.
Head of Claims Management Regulation, Kevin Rousell said:
‘We are making sure that people have time to think through any arrangement and are happy and clear about exactly what they are taking on before they agree anything, particularly before parting with any money.
‘These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer.’
The changes are designed to drive malpractice out of the industry and improve the reputation for the vast majority of CMCs that do follow the rules.
They are the latest of a series of ongoing moves to crackdown on concerns about the behaviour of CMCs, including bans on fees paid to firms for profitable claims and on adverts which offer upfront incentives to potential customers.
More information has recently been made available to the public, including an online search so they can check on whether there has been recent enforcement action against a company – available here: https://www.claimsregulation.gov.uk/enforcement.aspx
- Around 2,500 claims management companies are licensed to provide claims management services, with around 1,700 licensed for personal injury and 1,100 for financial claims; (some operate in more than one sector).
- The CMR Unit has continued to step up its enforcement work. Since regulation began in 2007 the licences of more than 900 CMCs have been removed.
- There were an additional 180 CMCs operating in the financial products and services sector during 2012/13 than at the same time in the previous financial year, taking the total number of CMCs in this sector to around 1,100.
Notes to editors:
- For further information please call the Ministry of Justice press office on 020 3334 3536.
- View the full response to the consultation on the rule changes here: https://consult.justice.gov.uk/digital-communications/cmr-rules-consultation-cp15-2012
- Further information about the Claims Management Regulation Unit can be found here: www.justice.gov.uk/claims-regulation/cmr
- The 2012/13 Claims Management Regulation Annual Report will be published on 23 July 2013.
- For further information on unsolicited marketing calls and SMS texts please visit the Information Commissioner’s Office (ICO) website: www.ico.org.uk