On July 30 2014, the Claims Management Regulation Unit at the Ministry of Justice (MoJ) published its Annual Report.

In the press release accompanying the report, the MoJ focusses on the fact that the number of authorised claims management companies (CMCs) fell from 2,693 in April 2013 to 2,097 in March 2014. The MoJ suggests that this reduction is due to the introduction of a tougher regulatory system, involving the introduction of new rules and more resources to supervise firms.

The detail of the report reveals that, in the 12 months to April 2014, 198 CMCs had their authorisations cancelled as a result of MoJ enforcement action. Two others had their authorisations suspended, one company had conditions imposed on them, and another 240 were formally warned by the MoJ. 604 voluntarily surrendered their authorisation.

Examples given in the report of reasons for taking enforcement action included:

  • Not forwarding complaints to the Financial Ombudsman Service within the required six month time limit
  • Sending large numbers of unsolicited marketing texts
  • Providing misleading information about fees and the services that would be provided in return
  • Breaching the referral fee ban on personal injury claims

Staff numbers within the Unit have increased by almost 50% over the course of the year, giving it more resources to supervise firms and carry out enforcement actions.

According to the report, there are 1,125 CMCs handling personal injury claims, 1,014 handling financial services claims, 418 dealing with criminal injuries, 361 with employment matters, 270 with industrial injuries and 167 with housing disrepair. The area of financial services claims management is described as being “less profitable” than previously, largely due to a reduction in the number of payment protection insurance complaints.

A key section of the report is the timeline, summarising the actions taken by the MoJ during the year. These actions include:

  • April 2013 – bans were introduced on personal injury referral fees, and on offering inducements to make a claim
  • May 2013 – information was gathered from two major banks on the complaints handling practices of CMCs
  • June 2013 – the MoJ started naming CMCs under investigation or subject to enforcement action
  • July 2013 – changes to the Conduct of Authorised Persons Rules came into force
  • August 2013 – as many as 33 CMCs lost their authorisation in the same month for conduct failings
  • November 2013 – a consultation commenced on more rule changes that would affect financial services CMCs
  • December 2013 – a new guide to nuisance marketing messages was published, in association with communications watchdog Ofcom
  • March 2014 – a consultation commenced on a fines system for CMCs

The report also gives details of the reasons consumers make contact with the MoJ, which include:

  • The level of fees charged, or the service provided in return for the fee
  • Unsolicited marketing contacts
  • Delays in providing refunds or handling complaints

Kevin Rousell, head of the Claims Management Regulation Unit, said:

“We have made it very clear to businesses that we take a zero tolerance approach to any malpractice or attempts to take advantage of victims of crime. Our changes have made a clear impact, for the benefit of consumers. But no regulator can ever stand still and we are going further. The new fines we are introducing this year will give us the power to impose tough sanctions on those firms that flout the rules with much more precision, power and proportionality than ever before.”