04Nov

The Claims Management Regulator at the Ministry of Justice (MoJ) has removed authorisation from a Swansea-based financial claims management company (CMC) that was in breach of as many as eight different sections of the Conduct of Authorised Persons Rules 2014.

The rules breached by Scarlet Marketing Services Ltd, which traded as Scarlet Services, SMS Legal and U Legal, were:

• General Rule 5 – the generic requirement to comply with all applicable laws and regulations
• Client Specific Rule 1a – the requirement for companies to act fairly and reasonably towards their clients
• Client Specific Rule 1c – the rule requiring all information given to clients to be ‘clear, transparent, fair and not misleading’
• Client Specific Rule 3 –the prohibition on engaging in anything that might be regarded as high pressure selling
• Client Specific Rule 6d – the need to avoid stating or implying in marketing material that the company has been approved by the Government, or is connected with the Government
• Client Specific Rule 11 – the requirement for contracts to be signed by the relevant client, and for the company to avoid taking any payment from the client until the contract has been signed
• Client Specific Rule 15 – the rule that says all clients must be given a ‘cooling off’ period of at least 14 days after signing any agreement. Should they decide to cancel the agreement during this period, they are entitled to a refund of all payments made
• Client Specific Rule 18 – the need to keep clients informed of the progress of their claim

As of October 31, the company’s website was still active, made no mention of the MoJ action and was still claiming to be able to assist with claims for mis-sold payment protection insurance.

This is just one of a number of recent cases where a CMC has lost its authorisation. The regulator will not hesitate to take the ultimate sanction if it finds that a company has failed to treat its clients fairly and in accordance with the relevant rules. Other companies have been hit with significant fines by the MoJ. Between April and June 2016, the MoJ commenced 11 formal investigations, six companies had their licence cancelled and 45 more were warned. Many of the common reasons as to why CMCs have action taken against them are included in the list of rules breached by Scarlet. Other companies have lost their claims management authorisation for making unsolicited marketing communications, such as sending large numbers of spam texts.

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.