Are the authorities clamping down on claims management companies (CMCs) that break the rules?

In a one-month period between March 10 and April 10, the Claims Management Regulator at the Ministry of Justice (MoJ) took enforcement action against four different CMCs.

Barrington Claims Limited had its authorisation withdrawn after it breached 12 separate areas of the Conduct of Authorised Persons Rules. Many of the breaches committed by Barrington Claims have also been cited in past MoJ enforcement notices concerning other companies. However, unlike many CMCs who have been subject to action, Barrington Claims was in breach of Client Specific Rule 12, which forbids a claims company from stating or implying that their clients have a greater chance of success by pursuing a claim with them, compared to their chance of success were they to pursue a DIY claim.

Other breaches committed by Barrington Claims included:

• Failing to satisfy itself of the merits of a claim before pursuing it
• Not maintaining appropriate records and audit trails
• Failing to ensure that referrals, leads and data obtained from third parties have been obtained in accordance with applicable rules and legislation
• Neglecting to ensure that all information given to clients is ‘clear, transparent, fair and not misleading’
• Engaging in high pressure selling
• Stating or implying that they are connected with the Government, a regulator or a public body; or that the Government has in any way endorsed the company
• Failing to check that clients understand the contracts they are asked to enter into

Help Your Claim was fined £533,000 after it breached Client Specific Rule 4. This rule forbids cold calling in person and asks that any marketing by telephone, email, fax or text complies with the Direct Marketing Association’s Code and any related guidance issued by the Association. Additionally, the company failed to ensure that information provided to clients was clear, transparent, fair and not misleading; and is also said to have engaged in high pressure selling.

Stevenson Drake was fined £10,000. It failed to take reasonable steps to confirm that any referrals, leads or data obtained from third parties were sourced in accordance with the rules. Similar issues were identified at TDP Direct Marketing, which received a fine of £6,600.

The past month has also seen two senior managers of CMCs disqualified from acting as directors for an extended period of time.

Dean Anthony Spencer, the director of financial claims CMC Claim and Gain, was disqualified for 10 years after his company repeatedly failed to provide the promised service to its clients, and took upfront fees from clients without their permission. Even though the MoJ warned the company about its practices, it proceeded to take upfront fees from a further 149 clients.

Christopher Ross White, the sole director of CMC Rock Law Limited, was disqualified from acting as a director for a period of nine years.

The Insolvency Service’s reasons for disqualifying Mr White included:

• Forcing clients to enter into contracts during the initial sales call, before they had been given time to consider the documentation
• Inadequate monitoring of the company’s sales agents
• Insufficient training being given to staff
• Failing to maintain appropriate records and audit trails

CMCs and their directors must be aware of the consequences of failing to meet their regulatory obligations. Companies need to keep a close eye on MoJ bulletins, take note of the points raised, and make any necessary changes to their policies and business practices. With all the recent enforcement activity, it may also be a good time for CMCs to have their compliance procedures audited by an external consultant.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.