Claims management companies (CMCs) 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.
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% of their annual turnover, meaning they could total hundreds of thousands of pounds and potentially millions in some cases.
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.