Corporate report

Claims Management Regulator: enforcement actions April to June 2016

Updated 21 April 2017

1. Live investigations and recent actions

The Claims Management Regulator (CMR) publishes updated information on recent enforcement actions and investigations.

2. Actions: April to June 2016

The regulator uses its powers to take action against authorised claims management companies (CMCs) and individuals who don’t meet the required standards.

Between April and June2016, the regulator took the following action:

• 11 investigations started
• 6 licence cancelled
• 45 warnings issued
• 74 audits carried out
• 242 visits conducted

3. PPI and other financial claims handling

The practices of some CMCs specialising in financial claims, particularly mis-sold payment protection insurance (PPI) and mis-sold packaged bank accounts (PBAs), continue to concern consumers and the financial services industry. Priority is being given to the ongoing monitoring of CMCs who operate upfront fee models and CMCs that are linked to them.

The regulator took the following action during this quarter:

• Audited 22 businesses
• Continued investigations into 8 CMCs. We expect to conclude most of these during the next quarter.
• Cancelled the authorisation of 2 CMCs. One CMC had committed serious breaches in relation to due diligence and the handling of a vulnerable customer. The other CMC had committed breaches in relation to telemarketing and taking up-front fees.
• Worked with law enforcement in relation to 3 live investigations involving CMCs

4. Nuisance calls and texts

The number of unwanted marketing calls and spam text messages continues to be a serious concern for CMR and other regulators with primary responsibility in this area – the Information Commissioner’s Office (ICO) and Ofcom. The regulator is working closely with these organisations to identify and take action against those companies that break the rules.

The regulator took the following action during this quarter:

• Cancelled the authorisation of Check Point Claims Ltd for failing to obtain sufficient consent to make automated telephone calls, making personal injury claimant referrals to solicitors in breach of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, failing to conduct due diligence on any referrals, leads or data leads accepted from third parties, and failing to maintain appropriate records and audit trails.
• Imposed a financial penalty of £315,000 on Elkador Finance Ltd for failing to prove claimant data was legally obtained from third parties, despite clear requirements set by the regulator and failing to control the marketing activities of those third parties.
• Audited 36 CMCs engaged in direct marketing and issued comprehensive written advice.
• Warned 16 CMCs engaged in non-compliant direct marketing.
• Progressed formal investigations into 11 CMCs for possible breaches of rules relating to nuisance calls, texts and emails.
• Updated our marketing and advertising guidance for CMCs with a section on ensuring consent is freely given, informed and specific.
• Continued to work closely with the ICO, Ofcom and the Advertising Standards Authority to assist with investigations.

The regulator also took the following action in July 2016, just outside the reporting period:

• Imposed a financial penalty of £50,000 on UKMS Money Solutions Ltd for misleading marketing and failing to conduct due diligence on the leads accepted from third parties. They had sent more than 1.3 million spam texts encouraging people to make a claim for PPI compensation.
• Cancelled the authorisation of Reactiv Media Ltd for failing to conduct due diligence on the leads accepted from third parties, misleading marketing, and misusing the expression “no win no fee.” They had called hundreds individuals without their consent who had registered with the Telephone Preference Service.

5. Personal injury claims handling

Personal injury fraud remains a primary concern and a key area of action for the regulator. CMR works with the Insurance Fraud Bureau (IFB) and the City of London Police’s Insurance Fraud Enforcement Department (IFED) to disrupt criminal operations. During this quarter, the regulator continued to collect intelligence from different sources on CMCs involved in other fraudulent activities.

The regulator took the following action to tackle criminal activity:

• Provided the Metropolitan Police and Greater Manchester Police with statements in respect of criminal investigations.
• Attended Government Agency Intelligence Network meetings and actioned a number of referrals from partners in respect of ongoing criminal investigations.
• Engaged directly with the Insurance Fraud Bureau and partners from the insurance industry to share actionable intelligence.
• Continued to work with West Midlands Police in operations against organised crime groups (OCGs)
• Continued to work with the National Crime Agency Civil Recovery Team and IFED to combat a North West OCG

The CMR continues with its programme of closely monitoring regulated businesses operating within the personal injury market. From around 1900 CMCs operating in 2013 there are now 842 as at the end of June 2016.

During the last quarter the regulator took the following action in relation to the referral fee ban and general compliance:

• Audited 54 CMCs and issued advice notices to those that were non-compliant with the referral fee ban and general rules and regulations
• Issued 7 warnings to CMCs

CMR continues to closely monitor CMCs operating in the personal injury market through a programme of audits and visits. Around 1,900 CMCs were in operation just before a ban on referrals fees came into effect in April 2013. This has since fallen to 842 CMCs as at the end of June 2016.