Regulator announces crackdown on CMCs cold-calling and taking up-front fees

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By Legal Futures

27 August 2010


Cold-calling: regulator to crack down on CMCs breaking rules

The claims management regulator has launched a crackdown on companies that are cold-calling consumers and taking up-front fees without giving clients a reasonable period to consider the agreement they are signing.

The regulator has warned that failure to comply “is likely to lead to enforcement action being taken against the business concerned and could ultimately put the business’s authorisation at risk”.

In a warning just issued to claims management companies (CMCs), it said: “We are aware that some businesses have been cold calling consumers and then referring their claims either directly to a solicitor on indirectly (through other claims management businesses) to a solicitor. Neither is permitted. The Solicitors Regulation Authority has made it clear that their rules on referral arrangements means that solicitors must not have a financial arrangement with an introducer in respect of claims which has been obtained (either by that introducer or through an intermediary) by way of unsolicited face-to-face or telephone ‘cold calling’.”

The regulator said that while many CMCs take up-front fees, some “may be failing to provide prospective clients with compulsory, pre-contract information as required by the Conduct of Authorised Person Rules 2007”. This information includes details of any referral fee.

The warning said it was also aware that “some businesses are not giving clients a reasonable period in which to consider the information. In particular some businesses take card details and/or payment during an initial marketing telephone call”.

This is not permitted and the regulator said CMCs must not take a payment or fee before the pre-contract information is provided in writing and the prospective client has had reasonable time to consider the information. Though a reasonable time is not defined, the regulator said it would always consider it unreasonable to provide the information at the point of contact and request a payment or fee.

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