The Claims Management Regulation (CMR) Unit, which is part of the Ministry of Justice, has launched a new online tool which will allow consumers to check whether any claims management company (CMC) they use is under investigation by the regulator, or has previously been subject to disciplinary action. Consumers will also be able to find out exactly which rules the CMC has broken.
There are currently around 2,600 CMCs in the UK that are authorised by the CMR Unit, of which 1,700 handle personal injury cases and 1,150 handle financial matters, usually relating to payment protection insurance (PPI).
Over 100 PPI CMCs have been banned from trading by the CMR Unit to date, while a further 149 have been warned. Over 900 CMCs have been banned since 2007, when regulation of the sector commenced. However, some bodies have expressed concern about the fact that typically only the firm is banned, and not the key individuals, allowing these individuals to start new firms. “Banned companies can often reappear in another guise shortly after being banned,” said Chris Hannant, policy director of the Association of Professional Financial Advisers, in October 2012.
Over 10,000 complaints were made to the CMR Unit in 2012, with areas of concern including: misleading marketing, high-pressure sales practices, fee disclosure and complaints handling procedures. An overwhelming majority of CMC complaints concern those active in the financial sector.
From 1 April 2013, CMCs were banned from issuing advertisements that offered cash inducements, and were banned from receiving referral fees. From 8 July, CMCs must alert all their customers within 14 days if they are subject to regulatory enforcement action, and must draft written contracts for all clients. It is also now possible for a customer to refer a complaint about a CMC to the Legal Ombudsman if they are not satisfied with the company’s response.