News story

Tougher rules for claims management companies

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

The Claims Management Regulator (CMR) is set to introduce a number of changes.

The Claims Management Regulator (CMR) is set to introduce a number of changes in response to consumer concerns that bad practice by some Claims Management Companies (CMCs) continues to plague the industry.

It will see an end to all verbal contract arrangements between consumers and CMCs, and the enforcement of written contracts before any fee can be taken. The introduction of new rules is the next step in the CMR’s push to crack down on bad practice by some CMCs.

Coming into force this summer the new rules will mean that CMCs must:

  • agree contracts in writing with their clients, before any fees can be taken;
  • refer to their regulatory status as being regulated by the claims management regulator - rather than the Ministry of Justice which till now could be misconstrued as an endorsement; and
  • inform clients if they are suspended or restrictions imposed on their business within 14 days of the enforcement action being taken.

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.”

As part of the industry wide crackdown, the Regulator has - from April 1 2013 - 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.