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‘A new weapon against claims firms’: MoJ gets power to fine rogue CMCs

The Ministry of Justice has been given the power to fine claims management companies for the first time, which it describes as “a new weapon” against rogue firms.

Currently the MoJ, which regulates claims management firms, can only take enforcement action against companies with substandard practices.

But under a new power included in an amendment to the Financial Services Bill, it will be able to impose large fines on claims firms which use information gathered by unsolicited calls and texts or which provide poor quality services.

The MoJ will also consult this week on a new set of toughened conduct rules for its claims management regulation unit, and on an increase in fees for regulated firms.

The increase in fees will be used to fund the recruitment of additional enforcement staff at the unit. A spokesman for the MoJ says it currently employs around 80 enforcement staff, and plans to increase this to more than 100 by the end of the year. 

The new set of rules, which will be published in full later this week, includes giving claims companies a duty to make sure the claims they are submitting have a realistic chance of success, as well as ensuring full evidence is provided to back up any allegations.

Firms will also have to carry out thorough audits of how data they use has been gathered, so they can no longer turn a blind eye to whether leads have been found by illegal marketing texts and calls.

The Government also plans to strengthen the claims management regulation unit by appointing independent regulatory experts in non-executive roles and commissioning a comprehensive review of the independence of its current governance arrangements.

Head of the claims management regulation unit at the MoJ Kevin Rousell said: “We do not tolerate bad practice and continue to take action against companies which break the rules, including removing their licence to trade. Issuing fines will be an important new weapon for us.”

Justice minister Shailesh Vara said: “We will not tolerate companies which waste hardworking people’s time and money through their own laziness, incompetence or frankly dubious practices.

“We are already making sure rogue companies are shut down – and now we are ensuring those who are wasting everyone’s time will pay for it.”

The Financial Services Bill is currently progressing through parliament and the MoJ says its fining powers are expected to take effect next year, when it will publish further details on maximum fine levels.

The MoJ says the number of claims firms in operation has fallen from a peak of 3,400 in 2011 to 2,300 now.



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Other than increased fees – I am all in favour of these proposals – good CMC’s will have nothing to worry about.

    In particular, greater accountability for the data sourced should at least have some impact on the torrent of texts received – I will certainly be responding to the consultation in support of such measures.

    Generally MOJ consultations on claims management get a limited number of responses so for those of you who regularly comment you have a chance to have your views heard by the regulator and who knows, unlike the FCA they my listen !

  2. I am inclined to agree with CMC Manager (I never thought I would ever write that!)

    Presumably those CMCs who do act responsibly will find that those cases which are justified will be dealt with more quickly if the wheat can be separated from the chaff.

    As far as regulatory fees are concerned, though, welcome to the real world!

  3. Will “information gathered by unsolicited calls and texts” include such information gathered by unregulated third party “marketing” companies, to which such illegal activties have been contracted out as a means of getting round the ban on such practices on the part of the CMC’s themselves?

    Isn’t it rather late for such powers to be vested in the MoJ?

    And why didn’t the FSA regulate CMC’s from the word go? Why was the FSA allowed to dump the job onto another body? To these two questions, I suggest, the answer is probably because it would have placed the FSA in the uncomfortable position of having one foot hard down on the throttle pedal and the other on the brake pedal.

    What a travesty of fair play.

  4. Julian

    I would agree with you that it’s okay coming up with new regulations and the ability to fine CMC firms if they are caught breaking rules but will it include firms associated with CMC like marketing firms.

    After all the old FSA and now the FCA take no action against marketing companies operating within financial services. Firms like and Which, who both advertise products and services without necessarily holding the authorisation for that chosen field. You can even go to these websites and get extensive case studies on any chosen financial subjects you care to think of.

    Whenever you raise the subject with the FCA about authorisation you are abruptly told that the firms are not making personal recommendations and therefore are not covered by FSMA 2000 and 2012.

    Why do I raise this concern? Well, surely CMC’s will simply do the same! If you’re going to regulate market regulate the whole market and make sure that the whole of the market abides by the same rulebook.

    It’s a simple principle and surely one that regulators should adopt!

    Yours sincerely

    Fed up of inaction and double standards!

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