The Ministry of Justice is consulting on proposals under which claims management companies cannot take fees from customers until a contract has been signed.

The MoJ proposes to amend its rulebook to read:

CSR 11 – A contract between a business and a client must be signed by the client, and the business must not take any payment from the client until the contract is signed.

The business must provide the following information in writing or electronically before a contract is signed…

Research by the British Bankers Association has suggested that in 16% of cases received by banks from CMCs there is no written contract in place.

The MoJ suggests that the proposed change could reduce the number of customer complaints CMCs receive. It has also opined that the cost impact of the proposed change should be minimal, and that business volumes would not reduce as a result.

The proposal is contained in an MoJ Impact Assessment document that also proposes that CMCs should state their regulator as being ‘The Claims Management Regulator’ rather than ‘The Ministry of Justice’; and calls for CMCs who also represent clients to inform their clients of changes in their authorisation status.

Claims management firms should consider whether changes to their charging arrangements will be needed in order to comply with the new provisions which are likely to come into effect.