Nuisance claims firms face huge fines

Nuisance claims firms face huge fines

Claims management companies (CMCs) that bombard people with nuisance calls could be fined of hundreds of thousands of pounds, it has been announced.

Those that provide bad service by wasting people's time and money by making spurious or unsubstantiated claims, employ misleading marketing tactics and/or gather information through unlawful unsolicited calls and texts will be punished.

Under government proposals outlined by Justice Minister Lord Faulks QC, the fines that will commence later this year will be based on the turnover of the company involved and the nature of the offences.

The biggest firms could be hit with a penalty amounting to as much as 20% of annual turnover.

Justice Minister Lord Faulks said: "No longer should claims companies be able to plague hardworking people and waste everyone's time. The scale of these fines shows just how serious we are about stopping them."

The fines represent the latest bid to get tough with CMCs as the government has already implemented a series of measures, which have included banning firms from taking fees from customers before contracts have been signed and taking referral fees in personal injury cases.

The number of CMCs registered to deal with personal injury claims has since fallen, from around 2,300 in early 2013 to 1,200 at the end of May 2014.

Kevin Rousell, head of the claims management regulation unit at the Ministry of Justice, said: "Again and again we have seen examples of bad practice from CMCs that continue to plague the claims industry and bother the public.

"We already take tough action against companies which break the rules, but now these fines will help to drive malpractice out of the industry and improve the reputation for those who do follow the correct procedures."

Rousell's unit already has the power to suspend or cancel rogue CMCs' licences to operate, while firms facing enforcement action or under investigation can be named and shamed.

Andy Cullwick, head of marketing at First4Lawyers, said: "While the MoJ's proposed fines may be a deterrent, we believe naming and shaming and removing the licence to practise of firms that flout the rules will be far more effective."

He explained: "Fines will also be limited as bigger firms, with a larger turnover, will have spent the time and money to ensure their marketing processes remain ethical and on the right side of regulation. Smaller firms, however, with unscrupulous methods may simply continue their malpractice under a different name. It would be a robust move for the MoJ to take steps to close loopholes that allow unethical CMCs from continually repeating these offences."

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Whilst we welcome tougher regulation of the CMC's the reality is that Insurer's are guilty of many of the malpractices which the MOJ are striving to drive out of the Claims Management Industry. The failing here is that the FCA are not mirroring the action taken by the MOJ.
Why? Because the on-going agenda which has been advaned by the government at the behest of the insurance industry is ultimately to help preserve their profits.
Why are the insurers allowed to offer inducements to potential new clients yet a CMC/Solicitor is not?
Why can insurers sell our data to unscrupulous marketing agencies who in turn make the same type of nuisance calls the MOJ are so keen to prevent?
Why won't insurer's share their fraud information with Claimant Solicitors who can help to prevent fraudulent claims being submitted?
Why if Insurers are keen to cut down the number of whiplash claims do they profit from passing claims to their panel solicitors?
In terms of the reduction in the number of CMC's now registered with the MOJ - this is a misleading representation by the MOJ in an attempt to suggest that their tougher regulation is working. It is not. As a result of poorly introduced government reforms and poorly drafted legislation, rushed through to placate the insurance industry and tory party donors, CMC's no longer "need" to be registered as they no longer receive "referral fees". The effect of the new legislation aimed at banning referral fees has been to allow CMC's to operate under the radar.