Sharp fall in number of CMCs as government confirms tough new conduct rules


Rousell: new rules will root out poor practice

There was a sharp increase in the number of claims management companies (CMCs) closing down in the first three months of 2013 ahead of the referral fee ban coming into force, Legal Futures can report.

The news comes as the government announces a tightening of CMCs’ conduct rules.

So far in 2013, 343 CMCs have surrendered their authorisation, compared to 189 during the same period of 2012.

Along with other action taken by the Ministry of Justice’s Claims Management Regulator (CMR), the fall marks a continuing contraction in the number of CMCs; there are now 2,693, compared to 3,007 at this time last year and 3,213 the year before.

The new conduct rules coming into force this summer – following a consultation last year aimed at addressing bad practices – mean that:

  • CMCs must agree contracts in writing with their clients, before any fees can be taken;
  • CMCs must refer to their regulatory status as being regulated by the CMR rather than the Ministry of Justice, which risked being misconstrued as government endorsement; and
  • CMCs must inform clients if they are suspended or restrictions imposed on their business within 14 days of the enforcement action being taken.

The ban on inducement advertising by CMCs also came into force last Monday.

CMR head Kevin Rousell said: “Time and time again we see examples of consumers who have inadvertently agreed to a contract with a CMC without a written contract in place. I want people to have time to think through their arrangement and be happy and clear about exactly what the deal is before they part with any money.

“These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer. Enforcing new rules will help to drive malpractice out of the industry and improve the reputation for the vast majority of CMCs that do follow the rules.”

Tags:




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog


Use the tools available to stop doing the work you shouldn’t be doing anyway

We are increasingly taken for granted in the world of Do It Yourself, in which we’re required to do some of the work we have ostensibly paid for, such as in banking, travel and technology


Quality indicators – peer recommendations over review websites

I often feel that I am banging the SRA’s drum for them when it comes to transparency but it’s because I genuinely believe in clarity when it comes to promoting quality professional services.


Embracing the future: Navigating AI in litigation

Whilst the UK courts have shown resistance to change over time, in the past decade they have embraced the use of some technologies that naturally improve efficiency. Now we’re in the age of AI.


Loading animation