Action against claims management companies which have failed to comply with industry standards has been stepped up over the last 12 months, as part of wider action to clamp down on bad practice, including bombarding the public with misleading advertisements and cold calling.
New statistics show the Claims Management Regulation Unit at the Ministry of Justice revoked 200 licenses last year, taking the total of closed firms to more than 1,100 since the start of regulation in 2007.
Justice minister Shailesh Vara said: “With rigorous new measures being brought in across the board, we are taking strong action to rein in the rogue firms operating in this sector.
“Continued action to remove licenses from companies with poor practices alongside forthcoming Claims Management Regulation reforms, proves just how much work is going on to get tough on companies that defy the rules and bombard the public with unwelcome calls and misleading information.”
Government action has also seen the total number of CMCs drop by more than 1,000 since a peak of 3,367 in 2011 to 2,254 in November 2013.
The greatest fall in numbers has taken place in the personal injury claims sector which has seen the number of CMCs fall by more than 1,000 from a peak of 2,553 in December 2011 to around 1,400 in January 2014.
This comes as the Government introduces a new set of toughened rules to crackdown on abuses, increases fees for CMCs and gives the Unit new powers to fine firms for rule breaches, as well as employing more enforcement staff to tackle irresponsible practice.
Kevin Rousell, head of the Claims Management Regulation Unit, said: “We have made it very clear that it is our absolute priority to protect customers and help organisations and businesses that are on the receiving end of high volumes of speculative claims which can clog up the system.
“We are making certain that firms are following the rules at a time of major change for the claims management industry.
“We do not tolerate bad practice and are continuing our work to drive malpractice out of the industry. Since the referral fee ban came into effect in 2013 we have inspected more than 900 CMCs and seen 500 leave the personal injury market.”
The CMR Unit has recently published the response to its consultation on increased fees for regulated firms to ensure the claims sector – and not the taxpayer – continue to provide the sufficient resources needed to meet the cost of regulation.
Tougher rules to further protect customers taking on the services of CMCs also include bringing an end to all verbal contract arrangements between consumers and CMCs agreeing written contracts before any fee can be taken, banning firms which offer cash or gifts for profitable claims and an order that firms must inform clients within 14 days if enforcement action has been taken against them.