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.”