Government to give claims regulator power to fine firms
Vara: those who waste everyone’s time will pay for it
Claims management companies (CMCs) are for the first time to face the prospect of fines for poor conduct such as spam texts, the government announced today.
In the latest toughening up of the regulatory regime for CMCs, the claims management regulation unit at the Ministry of Justice will also be expanded with more enforcement staff, funded by an uplift in fees paid by regulated claims firms.
As well as consulting on these fee levels, the ministry will further consult this week on new conduct rules, which target unsolicited marketing and poor practice in payment protection insurance (PPI) operations.
The government styled the move as a “crack down on the rogue firms responsible for bombarding the public with misleading advertising and flooding banks with unsubstantiated claims for compensation – at a cost to other customers”.
An amendment to the Financial Services (Banking Reform) Bill – which has almost finished its passage through Parliament – will enable the Claims Management Regulator to fine firms for breaching the conduct rules. At present he can only impose conditions on, suspend or cancel a CMC’s authorisation.
The new conduct rules include giving claims companies a duty to make sure the claims they are submitting have a realistic chance of success, as well as ensuring full evidence is provided to back up any allegations.
Firms will also have to carry out thorough audits of how data they use has been gathered, “so they can no longer turn a blind eye to whether leads have been found by illegal marketing texts and calls”, the government said.
As we reported last week, at the end of September 2013 there were 2,350 CMCs, down 23% in six months, with those operating in the personal injury market the main reason for the fall in the wake of the referral fee ban and ban on inducements.
Justice minister Shailesh Vara said: “We will not tolerate companies which waste hardworking people’s time and money through their own laziness, incompetence or frankly dubious practices. We are already making sure rogue companies are shut down – and now we are ensuring those who are wasting everyone’s time will pay for it.”
Financial Secretary to the Treasury, Sajid Javid, added: “These new rules will put PPI claims pests in their place. Cold call companies that bother the public will now have one less reason to do so. This will also help free up the banks to pay legitimate claims more quickly.”
In addition to employing more staff, the government said it will strengthen the claims unit by appointing independent regulatory experts in non-executive roles and will commission a comprehensive review of the independence of its governance arrangements.
Tags: claims management companies, CMC
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