New rules to protect customers from rogue claims firms

Tough new rules came into effect yesterday ensuring that customers taking on the services of claims management companies (CMCs) will be better protected.

From now onwards firms will need to have a signed contract before they can start to act for someone and take any fees – a phone call alone will not be sufficient.

The change is one of a series made by the Ministry of Justice’s Claims Management Regulation Unit in response to consumer concerns.

The new rules provide that:

• CMCs must agree contracts in writing with their clients and this must be done before any fees can be taken.
• CMCs must refer to their status as being regulated by the Claims Management Regulator, and not the MoJ – in the past firms have misrepresented their status as a government endorsement.
• CMCs must inform clients if they are suspended or if restrictions are imposed on their business. This must be done within 14 days of the enforcement action being taken.

Head of Claims Management Regulation, Kevin Rousell said:

‘We are making sure that people have time to think through any arrangement and are happy and clear about exactly what they are taking on before they agree anything, particularly before parting with any money.

‘These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer.’

The changes are designed to drive malpractice out of the industry and improve the reputation for the vast majority of CMCs that do follow the rules and are the latest of a series of ongoing moves to crackdown on concerns about the behaviour of CMCs, including bans on fees paid to firms for profitable claims and on adverts which offer upfront incentives to potential customers.

For more information, including an online search facility so that users can check on whether there has been recent enforcement action against a company, go to www.claimsregulation.gov.uk/enforcement.aspx

If you would like more information regarding the issues raised in this article, please do not hesitate to contact our experience team of lawyers & solicitors today.