The Government has announced that it will start fining rogue claims management companies for providing a bad service and bombarding people with nuisance calls by as much as 20 per cent of their annual turnover.
Announcing the new clampdown on 27 June, Lord Faulks QC said that the new measures would ensure that claims companies would no longer be able to “plague hardworking people and waste everyone’s time”.
Under the new rules which will be introduced later this year, CMCs will be fined for breaches that include using information gathered by unlawful unsolicited calls and texts; wasting people’s time and money by making unsubstantiated claims; and misleading marketing.
The Claims Management Regulation (CMR) unit at the Ministry of Justice (MOJ) will set the rules and adjudicate on which CMCs have broken them. The unit already has powers to vary, suspend or cancel any company’s licence to operate in the claims management sector.
“The scale of these fines shows just how serious we are about stopping [rogue CMCs],” said Faulks.
“This is also good news for the reputable firms in this industry, as it will boost confidence in the services provided by the sector.”
Andy Cullwick, head of marketing at First4Lawyers, applauded the MoJ’s move to tackle CMCs which use unethical marketing practices to generate leads, but said that more needed to be done to improve standards.
“We believe naming and shaming and removing the licence to practise of firms that flout the rules will be far more effective,” he said.
“Fines will also be limited as bigger firms, with a larger turnover, will have spent the time and money to ensure their marketing processes remain ethical and on the right side of regulation. Smaller firms, however, with unscrupulous methods may simply continue their malpractice under a different name.
“It would be a robust move for the MoJ to take steps to close loopholes that allow unethical CMCs from continually repeating these offences,” he added.