MPs pile pressure on government to crack down further on claims management companies

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13 November 2012

Parliament: call to crack down on text messaging

MPs from across the political divide last week lined up to urge the Ministry of Justice to go further to control the activities of rogue claims management companies (CMCs) than it has proposed to do.

In a parliamentary debate, MPs concentrated much of their fury on the use of unsolicited text messages aimed at obtaining instructions to pursue payment protection insurance (PPI) claims. They also slammed unscrupulous practices such as demanding up-front fees, making unauthorised deductions from credit cards, and hidden fee structures.

However, several contributors made a distinction between rogue companies and legitimate claims firms, which they said had a role to play in securing appropriate settlement for consumers.

Proposing the motion, the Conservative MP for Thurrock, Jackie Doyle-Price, observed that CMCs had “achieved a unique feat in uniting the consumer lobby and the financial services industry lobby” in calling for stronger regulation of the sector. The “consensus view” was that the MoJ’s “proposals do not go far enough”, she said.

The MoJ’s plans, published in August, include ensuring that written contracts precede up-front fees; that CMCs will not be able to refer to being regulated by the MoJ; that CMCs will have to inform clients of changes to their authorisation; and that CMCs publish terms and conditions online.

Shadow justice minister Andy Slaughter said the government had “dragged its feet so far” on CMCs. He supported a proposal by consumer organisation Which? to ban up-front fees. He added the government should “go further than that and to examine the whole process that CMCs use to engage consumers, from the initial scatter-gun approaches – the adverts and text messages – through the process of signing up, the contracts, the way people are engaged, the terms and conditions and fees, to the point when redress is sought and the ways people can escape”.

Mr Slaughter urged the government to identify the “real villains”, and not “simply to attack lawyers because they are an easy target, or claimants because substantial lobby groups such as the insurance industry contribute funds to the Conservative Party and daily whisper in its ear”.

Former justice minister and non-practising solicitor Jonathan Evans, Conservative MP for Cardiff North, agreed up-front fees should be banned altogether. He also proposed “the introduction of a sector-wide compensation scheme” covering CMCs “so that people who want to get rich quick and disappear tomorrow are not in a position to do so, because a fund will have been created to meet the liabilities that they leave behind”.

Mr Evans, who is the chair of the parliamentary all-party group on insurance and financial services, recommended imposing “a requirement not only that all claims management companies must be regulated, but that they can accept introductions only from those that are similarly regulated”. Further, existing regulatory requirements on CMCs should be enforced more effectively.

Responding, the new justice minister, Conservative solicitor Helen Grant, said the government would issue a response to its consultation on CMCs by the end of the year. She  continued: “I reassure all honourable members here today that there will be no let up in the [MoJ’s claims management regulation] unit’s compliance and enforcement work, and it will do what is essential to strengthen the regulatory and complaints regimes to provide better protection for consumers and the public.”


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