- Ministry of Justice
- Part of:
- Claims Management Regulator press releases and news stories
- 27 June 2014
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Lord Faulks QC has today announced rogue claims firms providing a bad service and bombarding people with nuisance calls will face large fines.
Rogue claims firms responsible for providing bad service and bombarding people with nuisance calls face fines totalling hundreds of thousands of pounds under new plans announced by Justice Minister Lord Faulks QC today.
Claims management companies (CMCs) that flout the rules will now be able to be fined for breaches, including:
- using information gathered by unlawful unsolicited calls and texts
- wasting people’s time and money by making spurious or unsubstantiated claims
- misleading marketing
Under the proposals the fines will be based on the turnover of the company involved and the nature of the offences. For large claims firms fines could be up to 20 per cent of their annual turnover, meaning they could total hundreds of thousands of pounds and potentially millions in some cases.
Justice Minister Lord Faulks said:
“No longer should claims companies be able to plague hardworking people and waste everyone’s time. The scale of these fines shows just how serious we are about stopping them.
“This is also good news for the reputable firms in this industry, as it will boost confidence in the services provided by the sector.”
The fines, due to be introduced later this year, will be brought against companies which break rules set by the Claims Management Regulation (CMR) unit at the Ministry of Justice (MOJ).
Kevin Rousell, head of CMR unit said:
“Again and again we have seen examples of bad practice from CMCs that continue to plague the claims industry and bother the public.
“We already take tough action against companies which break the rules, but now these fines will help to drive malpractice out of the industry and improve the reputation for those who do follow the correct procedures.”
The unit already has powers to vary, suspend or cancel any firm’s licence to operate in the claims management sector but the new fining power, created by a recent law change, provides an additional way to tackle rogue companies.
The new fines are the latest in a series of moves by the government to rid the industry of bad firms, which already includes appointing additional enforcement staff, banning firms from taking fees from customers before a contract has been signed and naming firms which are subject to enforcement action or under investigation.
In April 2013, a ban was introduced on referral fees in personal injury cases. The latest figures show that the number of CMCs registered to handle personal injury claims has fallen from around 2,300 at the start of 2013, to 1,200 at the end of May 2014.
In addition, new plans to further tighten the conduct rules for CMCs to help tackle abuses in the financial claims sector have been published. Existing requirements are to be strengthened to ensure that claims are properly substantiated – and any leads firms receive through telemarketing are legally obtained.
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
- The consultation which ran in April 2014 asked for views on the penalty ranges as well as the process for a fine being issued and collected.
- The law changes to allow fines to be issued were part of the Financial Services (Banking Reform) Bill 2013 (for more information about other aspects of the Bill contact HM Treasury press office on 0207 270 5238).
- View the response to the changes to CMR rules.
- More information about the CMR Unit and the consultation on proposals to amend the conduct rules.
- In June 2014, the CMR web pages moved across to GOV.UK. View details of live investigations and enforcement action against CMCs.
- View the response to the consultation on regulatory enforcement – financial penalties.
- In May the first 2 board members were appointed to the CMR Board. Carol Brady has over 20 years experience working in the field of regulation and consumer protection and particularly in delivering consumer services. She has recently been appointed as the Secretariat for the Consumer Code for Home Builders, and has also been appointed to the Commission for Local Administration. Caroline Wayman is the Principal Ombudsman and Legal Director, Financial Ombudsman Service. Caroline qualified as a barrister and spent time working in the insurance industry before joining the Insurance Ombudsman Bureau in 1999.
- Around 2,000 CMCs are licensed to provide claims management services, with around 1,200 licensed for personal injury and 1,000 for financial claims (some operate in more than one sector).
- For further information on unsolicited marketing calls and SMS texts please visit the Information Commissioner’s Office (ICO).
- For further information please call the MOJ press office on 020 3334 3536. Follow us @MoJpress.
Published: 27 June 2014