A payment protection insurance claims company based in Camarthen has had the conditions of its authorisation varied. This follows an investigation by the Claims Management Regulator at the Ministry of Justice (MoJ) which found the company to be in breach of four separate sections of the Conduct of Authorised Persons Rules 2014.

As a result of its previous failings, the company must now not only comply with all the usual MoJ rules but must also observe an additional condition imposed by the Regulator. It must now wait at least 24 hours from when it provides pre-contract information (such as terms and conditions) to a client before entering into a legally binding contract with that person.

The Rules which the company failed to comply with were:

  • General Rule 2a –the requirement to take all reasonable steps to ensure that there are legitimate grounds for making a claim before that claim is presented it to a third party
  • General Rule 2e – the obligation to confirm that any referrals, leads or data have been obtained in accordance with the requirements of the MoJ’s Rules and applicable legislation
  • Client Specific Rule 1 – the need to ensure that all information given to a client is ‘clear, transparent, fair and not misleading’
  • Client Specific Rule 9 – the requirement for the authorised claims management company to verify that marketing materials issued on its behalf by third parties comply with the relevant MoJ Rules and applicable legislation

The MoJ will continue to supervise claims management companies (CMCs) for approximately 12 more months. Where its investigations uncover evidence of poor treatment of customers, data protection issues, concerns over marketing practices, issues with the competence of a company’s management, or any other area of concern, then it can still decide to issue a fine, impose conditions on a company’s authorisation, or take the ultimate step of cancelling a company’s authorisation.

From an as yet unspecified date, likely to be in spring 2019, regulation of CMCs will transfer to the Financial Conduct Authority (FCA). The FCA is certain to impose much more stringent requirements on companies in the claims sector and will also be able to impose stricter punishments. The size of the fines the FCA will impose on non-compliant CMCs will be higher than those under the current regime. In addition, the FCA will have the power to impose fines and bans not just on the company itself, but also on a company’s senior management.

CMCs are therefore advised to pay close attention to any communications that are issued in the coming months relating to the FCA handover.

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