The House of Commons has issued a briefing note ahead of an expected major change in claims management regulation. The January 2018 briefing note acknowledges that, at present, claims management companies (CMCs) are regulated by a unit of the Ministry of Justice (MoJ), under the terms of the Compensation Act 2006.

It goes on to say that consumer complaints about CMCs primarily concern companies handling financial claims, and notes that there are specific rules which apply to unsolicited text messages.

Finally, the briefing note makes reference to the inclusion of a Financial Guidance and Claims Bill in the 2017 Queen’s Speech. The note is accompanied by a copy of a report from June 2017 on the subject of CMCs and their regulation.

This report states that the Financial Guidance and Claims Bill is primarily designed to transfer regulation of CMCs from the MoJ to the Financial Conduct Authority (FCA). In the Spring Budget in 2016, the Chancellor of the Exchequer said of the proposed change of regulator:

“The new regime will be tougher and will ensure CMC managers can be held personally accountable for the actions of their businesses.”

The report also notes that a 2006 prediction that the number of CMCs would decrease once the Compensation Act became law failed to materialise. In 2006, there were around 500 companies estimated to be carrying out claims activities, yet by 2009/10 there were as many as 3,367 companies authorised by the MoJ. This number has fallen steadily to 1,388 in 2016/17, yet the present Government remains extremely concerned about the activities of some CMCs, and has thus decided that new legislation and a more stringent regulatory environment is required.

The report includes a 2013 quote from the then Justice Minister, who stated:

“As the scale of potential claims for PPI compensation has become clear, CMCs have become particularly active in this market. Unfortunately, this increase in activity has in some cases been accompanied by an unacceptable fall in standards.”

The report states that, once it has taken over as claims regulator, the FCA will be asked to devise a scheme for capping the fees that CMCs can charge. However, as payment protection insurance claims (PPI) can only be made for another 18 months or so – up until August 29 2019 – the Financial Guidance and Claims Bill also proposes an interim cap on PPI fees of 20%, inclusive of VAT.

The report goes on to acknowledge that there have been a number of concerns about the marketing practices of CMCs, such as companies engaging in cold calling and/or sending unsolicited texts. The report refers to the existing rules in this area, which include the Direct Marketing Association Code of Practice and the BCAP Code for Text Services.

Finally, reference is made to the fact that all CMCs are required to have complaints handling procedures in place, and that complaints about CMCs can be referred to the Legal Ombudsman.

The Financial Guidance and Claims Bill is currently at second reading stage in the Commons, and looks certain to deliver a major change to the claims management landscape in the UK.

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.