Issues with the way claims management companies (CMCs) obtain their leads is perhaps one of the most common reasons why enforcement action is taken by the industry regulator.

CMC Creditline Financial must now obtain the specific approval of the Claims Management Regulator at the Ministry of Justice (MoJ) every time it wants to accept a client from an unauthorised third party.

The MoJ decided to impose these conditions on Creditline after finding issues with the way it was accepting business from other parties. Now, if the Peterborough-based payment protection insurance specialist wishes to accept a client from an organisation that isn’t regulated by the MoJ, it must write to the regulator in advance to obtain their consent to proceed.

The MoJ enforcement notice says that:

“Written consent will be granted upon the assessment of the information within the written notice provided by Creditline Financial Limited, if the Regulator is satisfied with status of the third party and the agreement between the parties, within 30 days of the written notice subject to the necessary information being provided.”

These obligations have been imposed on Creditline after it failed to comply with the following three sections of the MoJ’s Conduct of Authorised Persons Rules 2014:

  • General Rule 2e – requiring CMCs to take reasonable steps to ensure that any referrals, leads or data obtained from third parties are obtained in accordance with the requirements of the legislation and Rules
  • General Rule 17 – which says that if a CMC accepts introductions from exempt introducers, it must first satisfy itself that these other parties have grounds for being exempt
  • Client Specific Rule 19 – which asks CMCs ensure that marketing material distributed on their behalf by third parties complies with the relevant legislation and Rules

Obtaining leads from third parties, and marketing material issued on behalf of CMCs by other agencies, are two areas where claims companies cannot afford to be non-compliant. The MoJ is devoting a lot of its resources to monitoring companies’ activities in this area. Any company unsure as to what they should be doing in this area may be best advised to seek the advice of their compliance consultant.
In other claims management news, the Financial Ombudsman Service (FOS) has revealed that it is gearing up to accept complaints about CMCs that are currently handled by the Legal Ombudsman. The Financial Guidance and Claims Bill is currently being considered by Parliament. The Bill is intended to transfer regulation of CMCs from the MoJ to the Financial Conduct Authority, and to give customers the right to refer complaints about their CMC to the FOS.

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.