Llanelli, South Wales-based claims management company (CMC) Legal Collect Ltd has been stripped of its authorisation to conduct claims management services, after the Claims Management Regulator found the company to be in breach of eight of its rules.

The sections of the Conduct of Authorised Persons Rules 2014 that Legal Collect failed to comply with were:

• General Rule 1 – which requires companies to display honesty and integrity when conducting business
• General Rule 2d – which requires companies to maintain appropriate records and audit trails
• General Rule 3 – which requires directors and senior management of CMCs to have the necessary competence and understand the legislation and regulations with which they must comply
• General Rule 5 – which simply states that companies must comply with all relevant laws and regulations
• General Rule 8 – which stipulates that companies must handle complaints in accordance with the Regulator’s rules in this area
• Client Specific Rule 1c – which dictates that all information supplied to clients must be ‘clear, transparent, fair and not misleading’
• Client Specific Rule 6d – which prevents CMCs from stating or implying in their marketing material that they have been specifically approved by the Government, or that they have a connection with a government agency
• Client Specific Rule 11 – which requires all contracts between a CMC and a client to be signed by the client, and states that payment must not be taken until the contract is signed

Legal Collect specialised in payment protection insurance and packaged bank account claims. As of April 15 2016, its website made no mention of the Regulator’s action, still invited new clients to get in touch about making a claim and still stated that the company was “regulated by the Claims Management Regulator in respect of regulated claims management activities,” even though the cancellation of its authorisation took effect two days previously.

The reasons why Legal Collect lost its authorisation serve as a warning to other CMCs to check that they are complying with their obligations.

Under the existing regulator, the number of rules CMCs have to comply with has already increased significantly in recent years. However, even stricter regulation is on the way, as in March 2016 the Government announced that the Financial Conduct Authority (FCA) will assume responsibility for regulation of CMCs. No date for this switchover was officially announced, although media reports suggest it may occur in 2018.

Financial services firms who are regulated by the FCA are required to comply with an extensive rulebook, are required to submit comprehensive data returns and are subject to a structured monitoring programme. The FCA can also impose bans and fines not only on authorised firms that break the rules, but also on key individuals within firms, unlike the existing regime which only allows companies to be punished. For example, in March 2016 alone, six individuals were prohibited by the FCA.

The announcement was made as part of the Government’s Budget measures. A Treasury statement referred to the FCA’s policy of holding senior management accountable by saying:
“The Government is clamping down on the rogue claims management companies that provide bad service and bombard customers with nuisance calls. The new regime will be tougher and will ensure claims management company managers can be held personally accountable for the actions of their businesses.”

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.