The April 2016 bulletin for claims management companies (CMCs) from the Claims Management Regulator at the Ministry of Justice (MoJ) addresses five key topics: marketing practices, Data Protection Act (DPA) compliance, use of agents and third parties, the Government’s review of the claims management regulatory system and the consultation on capping the fees charged by companies.

Regarding marketing practices, the bulletin contains a link to the MoJ’s guidance on this subject. Companies are advised to read the full document, but some of the key information it contains includes:

• Companies must ensure information provided to both existing and prospective clients is ‘clear, transparent, fair and not misleading’. Examples of ways CMCs have breached this rule include: informing clients a specific sum is due to them in compensation on the first contact; making false promises as to the time in which the claims process will be completed; and stating or implying the company is a law firm, when this is not the case
• Personal cold calling, such as calling door-to-door or stopping passers-by, is prohibited. Telephone cold calls cannot be made to anyone registered with the Telephone Preference Service, or to anyone who has actively opted out of receiving these calls. Automated calls and marketing texts can only be made where the recipient has specifically informed the company they do not object to receiving these.
• Companies cannot state or imply they are connected with the Government or a government body when this is not the case
• If a company refers to the fact they are authorised, they must use the specific wording “Regulated by the Claims Management Regulator in respect of regulated claims management activities.” This applies to telemarketing as well as printed marketing material.
• Companies that use the statement ‘no win no fee’ must qualify this if either of the following applies: a fee would be charged if the agreement was cancelled, or a fee may be charged for responding to a Subject Access Request
• Any leads obtained via cold calling, even if obtained in compliance with the MoJ rules, cannot be passed to a solicitor as this would put the legal professional in breach of the Solicitors Regulation Authority rules
• All CMC websites must state: the full legal name of the company, its address, its registered address (if different), its contact details (including email address), its registration number and its country of registration. The following statement must also appear: “X Business is regulated by the Claims Management Regulator in respect of regulated claims management activities; its registration is recorded on the website www.gov.uk/moj/cmr.”

CMCs are urged to make use of the Self-Assessment Tool, which can be found on the Information Commissioner’s website, which allows companies to assess whether they are complying with their DPA obligations.

Companies that use agents or other parties, say for telemarketing purposes, were reminded that they must conduct adequate due diligence on these third parties, and must maintain records to demonstrate this. A number of CMCs have attempted to justify breaches of telemarketing legislation by saying that a third party made the communications on their behalf, but the MoJ will always hold the authorised CMC liable for any failings of third parties which they use.

At present, the MoJ retains responsibility for claims management regulation. However, the bulletin highlights that this will change in the not too distant future, as the Government has decided to transfer claims management regulation to the Financial Conduct Authority (FCA). At the appropriate time, all CMCs will need to apply to the FCA for re-authorisation, and CMCs are warned that the FCA has the power to take action against key individuals, such as directors and senior management – it may for example in serious cases decide to ban an individual from the industry for life.

CMCs are also informed that the consultation regarding proposed restrictions on the level of fees they can charge has now closed. Further information on this subject will be published at a later date.

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.