Latest information from the Claims Management Regulator at the Ministry of Justice (MoJ) shows that more than 200 claims management companies (CMCs) lost their licences for breaches of regulatory requirements during 2013.
The total number of authorised CMCs in the UK is now reported as 2,254. This figure peaked at 3,367 in 2011.
The MoJ has recently been given additional resources to supervise firms, but even with its previous level of resource, the percentage of companies being banned was astonishingly high. The 2013 figure of around 200 means that almost 10% of the companies in the industry were deemed to be unfit to trade during the past year. When we than consider that the number of CMCs banned by the MoJ since 2007 stands at more than 1,100, it can be seen that a very large proportion of the CMCs that have operated in the UK have been forced to cease trading against their will.
Whilst most of the banned firms operate in the personal injury arena, CMCs handling payment protection insurance claims and other financial matters cannot afford to ignore the latest regulatory developments. The regulatory landscape is changing all the time for CMCs, and new regulatory requirements have been imposed on a regular basis in recent years.
2013 has also seen saw CMCs subject to new requirements regarding: displaying terms and conditions on their websites, a ban on verbal contracts, the need to alert customers within 14 days if they are subject to regulatory enforcement action, a ban on issuing advertisements that offer cash inducements and a ban on receiving referral fees.
Forthcoming changes are expected to include: a requirement to establish that claims have a realistic chance of success before submitting them; new obligations to provide evidence to back up claims; and the need to conduct thorough audits of data obtained, e.g. sources of marketing leads.
With all the new rules and the additional regulatory scrutiny, now is a good time for CMCs to have a comprehensive independent audit of their practices and procedures.
Kevin Rousell, head of the Claims Management Regulation Unit, said of the latest data: “We have made it very clear that it is our absolute priority to protect customers and help organisations and businesses that are on the receiving end of high volumes of speculative claims which can clog up the system. We are making certain that firms are following the rules at a time of major change for the claims management industry. We do not tolerate bad practice and are continuing our work to drive malpractice out of the industry.”
Justice Minister Shailesh Vara MP added: “With rigorous new measures being brought in across the board, we are taking strong action to rein in the rogue firms operating in this sector. Continued action to remove licenses from companies with poor practices alongside forthcoming Claims Management Regulation reforms, proves just how much work is going on to get tough on companies that defy the rules and bombard the public with unwelcome calls and misleading information.”