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Govt proposes tougher rules for claims 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” infomation about relevant ombudsman schemes.

The consultation, published today, 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, claims chasers must also provide “unambiguous” information about ombudsman schemes and other forms of redress.

Firms are already banned from implying that consumers can get a more favourable outcome by using them rather than going to the Financial Ombudsman Service, Criminal Injuries Compensation Authority or the Housing Ombudsman Service. The MoJ has now added the Financial Services Compensation Scheme to that list.

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.

The consulation also proposes rules that will require claims firms to keep customers updated by informing them of any variation to, or suspension of, their authorisation status.

Under the proposals, regulated firms could 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 April 2013.

Which? executive director Richard Lloyd says the Government is not going far enough in clamping down on unscrupulous firms.

He says: “We want to see a ban on upfront fees and tougher enforcement against misleading advertising, because we know many consumers are being misled into using a claims firm when they can easily reclaim their money for free themselves.

“The Government must put pressure on the Information Commissioner to ban cold-calling. Claims firms should also be required to be more upfront, publish all the terms and conditions, fees and charges online and make this information readily available to customers.”

Last week, the MoJ unveiled its plans to tackle payment protection insurance misselling claims by boosting staff numbers and creating a specislist team to target poor practice.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Every time I receive a false claim for mis-selling PPI against me I copy the MOJ in on my reply which they acknowledge every time. They welcome this information as it helps them identify those firms who are not making any effort to establish if any PPI was sold in the first place which they deem to be bad practise. I would encourage all brokers to do the same. Come on guys at least put up a fight.

  2. Also, whilst we all have many, many things to do before the end of 2012, I would suggest that responding to the consultation will add greater weight to the intolerance with which we all hold for fraudsters and con-artists.

  3. Which points out; “we know many consumers are being misled into using a claims firm when they can easily reclaim their money for free themselves.” But fails to make any mention of all the IFA’s who are having to pay out for false PPI claims which are referred to the FOS also, not to mention the additional administration this is causing when having to respond to these false allegations. These claim chasing for self-profit only companies are a leech on both the consumer and IFA’s who quite often have never even sold a PPI case in the first instance. Regulation to stop these unscrupulous claim chasing companies is long overdue.

  4. The thing that really needs clamping down is the blatantly misleading advertising. I regularly receive text messages and recorded phone calls – the last one saying

    “URGENT you are owed £3350 for the PPI that you took out”.

    The fact that I have never had PPI and so cannot be owed anything, let alone a specific amount like £3350 seems to have escaped them! My 14 year old daughter got one too!!

    These adverts are blatant misrepresentation and lies and the firms perpetrating them, and those benefitting from them, should have their authorisations withdrawn as a matter of course.

    Also what is the Advertising Standards Authority doing to stop these false adverts? Nothing I suspect.

  5. How about provision of evidence being a requisite, a proper redress scheme funded by claims firms to meet the costs suffered through fraudulent claims and at least an evidence based balance of probability test being applied.

    Oh and about abolition of ‘no win – no fee’ in line with the ‘no sale – no commission’ method of paying for ‘advice’.

  6. Govt proposes……. Too Little, Too Late! They want to implement rules by April next year, they should have been in place years ago. Yet again they show a breathtaking yet all too common misunderstanding of the real world outside the regulatory, gravy train that is quangoland. Ooooh! You must have a written contract, not a verbal one – shiver me timbers! Yep, that will dissuade someone with £5k they want to shift off a credit card or who just fancies a couple of weeks away from this miserable summer responding and carrying through with a response to a text message, automated phone call or tv advert – why not, there are no consequences. Let’s just see what I can get out of the system, Fred in the Pub did it and it didn’t cost him. Nothing ventured nothing gained etc…. What is needed is legal action, let the massive legal resources of the MoJ work out the offence. I really am fed up with the staggering incompetence of these dullards, they couldn’t regulate the gas flame on the cooker at home (probably have the dosh (OPM) to have someone do that for them anyway ;-))

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