The Ministry of Justice's (MoJ) Claims management Regulator is to halt all verbal contract arrangements between consumers and claims management companies (CMCs) from this summer.
Following a consultation on proposed new regulations, the watchdog wants CMCs to enforce written contracts before any fee can be taken from the consumer.
Coming into force on 8 July the new rules will also mean that CMCs must: refer to their regulatory status as being regulated by the claims management regulator – rather than the MoJ; and inform clients if they are suspended or restrictions imposed on their business within 14 days of the enforcement action being taken.
The changes will follow on the heels of the banning of inducement advertising by CMCs.
“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,” said Kevin Rousell, head of claims management regulation.
“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.
“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.”