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Govt consults on stricter rules for claim chasers

MoJ Ministry of Justice 480

The Ministry of Justice has proposed new rules for claims management companies that will require them to obtain signed contracts from consumers and force them to provide “unambiguous” information about relevant ombudsman schemes.

The consultation, published last week, proposes rules requiring firms to obtain written, signed agreements from consumers before charging any fees. Currently, contracts can be agreed verbally.

The consultation states: “The provision of a written agreement would provide consumers with more protection by allowing sufficient time for a consumer to read and understand pre-contractual information before agreeing a contract.”

Under the proposals, claim chasers must also provide “unambiguous” information about ombudsman schemes and other forms of redress.

The MoJ is concerned the use of its branding makes consumers believe firms are endorsed by the Government, so it is proposing banning the use of its name in promotions. It says firms should only refer to it as the claims management regulator.

Under the proposals, regulated firms could also face action if they work with unregulated introducers that break any MoJ rules on advertising, marketing and soliciting business.

Cold-calling by firms will be addressed separately to the consultation. The MoJ is working with the Information Commissioner to deal with unsolicited communications such as text messages.

The consultation closes on 3 October. The MoJ will publish a summary of responses in December, with the aim of implementing new rules by next April.

Earlier in the month, the MoJ revealed plans to crack down on payment protection insurance misselling claims by boosting staff numbers and creating a specialist team targeting poor practice.

Highclere Financial Services partner Alan Lakey is responding to the consultation and urges other advisers to do the same.

He says: “I am glad there is a consultation. The problem with the MoJ though is that it only has 57 staff which is about one-third of the number it needs.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. I heard on the radio the other week a programme about CMC’s, including interviews with a few people who’d used them. One interviewee said a CMC had obtained for him a settlement of £82,000 ~ of which the CMC’s cut was £26,000. Is it any wonder that CMC’s are going after everything and anything from which they can get a large slice? Go for the money now and worry about the rules later.

    And if intermediaries are going to be subject to adviser charging rules, then why not CMC’s? Shouldn’t CMC charges be capped at, say, £1,000 per case?

    In the same way as intermediaries are required to document their recommendations, shouldn’t CMC’s be required to produce a written summary of any proposed claim, a copy of which the claimant would then be required to sign, confirming the content to be a truthful and comprehensive representation of the facts of the case? That signed document would then form the basis of the claim and any element of it proven to be materially inaccurate (in other words a lie) would invalidate the claim. Wouldn’t that constitute a proper professional code of practice to which these cowboy outfits should be required to adhere? The fact that no such code of practice exists suggests once again that, as a regulator, the MoJ doesn’t really know what it’s doing and just got landed with the job because the FSA, having created the very climate in which these scumbag CMC’s can flourish, didn’t itself want the job of regulating them. It all stinks.

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