The referral fee ban has reduced the number of nuisance calls made to potential personal injury claimants, the government has claimed.
The Ministry of Justice is also looking to increase its powers over claims management companies (CMCs) yet further so that it can fine them up to 20% of their turnover.
According to a ‘Nuisance calls action plan’ published by the Department for Culture, Media and Sport, between March 2013 and February 2014, the MoJ’s Claims Management Regulation (CMR) Unit received 1,480 consumer complaints about unsolicited calls and texts related to mis-sold PPI claims and accident claims
“The ban on referral fees in personal injury cases appears to be reducing the volume of marketing calls to potential clients, as CMCs can no longer receive a fee for the referral of client details,” it said. “The CMR Unit is actively policing the ban on referral fees, in addition to a ban on CMCs offering financial rewards or similar benefits to potential claimants as an inducement to make a claim.”
It said the CMR Unit now has a dedicated team working on unsolicited marketing, and in the year to February 2014, the number of consumer complaints it received about unsolicited calls fell by 45%, unsolicited texts by 61% and unsolicited e-mails by 89%.
The fines proposed by the government would be for offences such as using information gathered by unsolicited calls and texts, providing bad services or wasting time and money by making spurious or unsubstantiated claims.
“This will mean fines of hundreds of thousands of pounds, and potentially millions in some cases,” the government said.
The necessary primary legislation was included in the Financial Services (Banking Reforn) Act 2013, and the CMR Unit will be consulting on the details of the proposed financial penalties scheme with a view to having it place by the end of 2014.
Justice secretary Chris Grayling said: “It is time to stop these claims companies from plaguing hardworking people’s lives and wasting everyone’s time – the scale of these fines shows just how serious we are about stopping them.
“The Claims Management Regulator already takes tough action against companies which break the rules, suspending and closing down rogue firms, but now these fines will give us an extra weapon to drive bad behaviour out of the industry.”
The action plan brings together government, regulators, consumer groups and industry in “the first ever comprehensive and co-ordinated effort to clamp down on nuisance calls”.
Between April and November 2013, the Information Commissioner’s Office (ICO) received 120,310 complaints about unsolicited marketing calls.
Other proposals announced in the action plan include consulting later this year on lowering the threshold for when the ICO can fine companies. Currently calls must cause ‘substantial damage’ or ‘substantial distress’.
Richard Lloyd, executive director of consumer group Which?, will chair a task force to investigate how consumers give and withdraw consent to receiving marketing calls.
Legally, unsolicited live direct marketing calls cannot be made to a number that is registered with the Telephone Preference Service unless the person has agreed to receive calls by that company. All automated recorded marketing message calls require prior consent.
These regulations apply to calls made from within the UK or from outside the UK, on behalf of UK companies.