Claims management companies (CMCs) who provide a bad service or bombard people with nuisance calls will now face hefty financial penalties according to the Ministry of Justice (MoJ).
New powers brought in for the Claims Management Regulation (CMR) unit at the MoJ mean that regulated Claims Management Companies (CMCs) which break the rules can now be penalised financially.
For large CMCs who earn over £500,000 annually, penalties could be up to 20 per cent of their annual turnover. Smaller CMCs can be fined up to £100,000.
Examples of rule breaches include: using information gathered by unlawful unsolicited calls and texts; wasting people’s time and money by making spurious or unsubstantiated claims; and using misleading marketing
Justice Minister Lord Faulks said: “People should not have to have their time wasted by the unscrupulous practices of some claims firms.”
Kevin Rousell, head of the Claims Management Regulation unit, said that the penalties were a key measure to tackle the companies whose “bad practice plagues the reputation of the claims management”.
Claims firms subject to investigation or a penalty are also no longer able to surrender their licence without explicit consent from the regulator.
The latest figures from the MoJ show that the number of CMCs registered to handle personal injury claims has fallen from around 2,300 at the start of 2013, to 1,140 at the end of September 2014.
From this month complaints about bad services being provided to customers by claims management companies are now handled by the Legal Ombudsman.