Effective from April 1 2018, the UK’s claims management companies (CMCs) are subject to a number of new rules, which include:
- If a payment protection insurance (PPI) claim is being pursued, and it transpires that the client did not in fact take out PPI with the firm in question, then the CMC cannot charge any fee to the client at any stage of the process
- Clients cannot be asked to pay any fees in respect of any PPI claim until the entire claims process has concluded
- For financial products other than PPI, fees cannot be charged before the CMC has commenced providing services to the client. For the purposes of this rule, advertising or direct marketing does not constitute providing a service to the client, and hence the fee can only be charged once the CMC has commenced advising, referring, investigating or representing the client in respect of their claim
- Except in the limited circumstances where regulation 8 of the Damages-Based Agreements Regulations 2013 (relating to employment claims) applies, CMCs must allow their clients to withdraw from contracts at any stage.
- If the client chooses to cancel a contract, any fee charged must be reasonable and must reflect the costs incurred by the CMC in carrying out work for the client
- If the client chooses to cancel a contract relating to a financial claim, then no fees can be charged unless the CMC has already commenced providing services to that client – as explained above, advertising and marketing is not sufficient to be classed as ‘providing services’
- If a client chooses to cancel a contract relating to a PPI claim, then no fees can be charged in any circumstances
- When presenting a client with an invoice for any cancellation fees, the CMC must provide an itemised bill which must set out what regulated claims management services have been provided, and how the fees have been calculated
- Any contract between a CMC and a client must be signed by the client
- For non-financial claims, a CMC cannot impose any charges until the contract has been signed
- The standard terms and conditions of any contract must be clear and must also be displayed prominently on the CMC’s website (where one exists)
Any CMC in any doubt as to how to apply these new rules within their business is advised to seek the assistance of their compliance consultant immediately.
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.