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Claims management firms face tougher rules Claims management firms face tougher rules
(about 2 hours later)
People who are let down by claims management companies (CMCs) will be able to go to the Legal Ombudsman.People who are let down by claims management companies (CMCs) will be able to go to the Legal Ombudsman.
The Ombudsman has the legal power to ensure consumers can get compensation where appropriate. The Ombudsman has the legal power to award compensation to consumers if appropriate.
Claims firms have been blamed for stoking up thousands of bogus claims against banks for the mis-selling of payment protection insurance (PPI).Claims firms have been blamed for stoking up thousands of bogus claims against banks for the mis-selling of payment protection insurance (PPI).
The government has announced the change as part of a wider attack on rogue claims firms.The government has announced the change as part of a wider attack on rogue claims firms.
The chief Legal Ombudsman, Adam Sampson, said: "This is great news for the public and consumers as we have significant powers of redress to help protect them."The chief Legal Ombudsman, Adam Sampson, said: "This is great news for the public and consumers as we have significant powers of redress to help protect them."
"We are confident we can support the claims management regulator to improve standards across the industry.""We are confident we can support the claims management regulator to improve standards across the industry."
The Ombudsman will take over dealing with complaints about individual CMCs from the Ministry of Justice's (MoJ) Claims Management Regulation Unit (CMRU) in 2013.The Ombudsman will take over dealing with complaints about individual CMCs from the Ministry of Justice's (MoJ) Claims Management Regulation Unit (CMRU) in 2013.
Some CMCs use improper cold-calling, by phone or text, to drum up clients. The MoJ does not have the power to award compensation.
Last week, the MoJ proposed that CMCs in England and Wales should have to use signed written contracts with their clients before they could charge fees.Last week, the MoJ proposed that CMCs in England and Wales should have to use signed written contracts with their clients before they could charge fees.
James Daley, the editor of Which? Money, said the plans were long overdue. James Daley, the editor of Which? Money, said the latest plans were long overdue.
"Hopefully that will start to be a deterrent against these companies treating their customers badly," he said."Hopefully that will start to be a deterrent against these companies treating their customers badly," he said.
"But unfortunately there are so many of them and there is such a big pot of money for them to play [that] we are going to need the Ministry of Justice and the regulators to get a lot tougher on them before this industry is cleaned up.""But unfortunately there are so many of them and there is such a big pot of money for them to play [that] we are going to need the Ministry of Justice and the regulators to get a lot tougher on them before this industry is cleaned up."
Thriving industryThriving industry
CMCs advertise widely on TV, newspapers and the internet, encouraging people to sue for personal injury compensation, and for other losses.CMCs advertise widely on TV, newspapers and the internet, encouraging people to sue for personal injury compensation, and for other losses.
Some firms use improper cold-calling, by phone or text, to drum up clients.
In the past year, the banking industry's exposure to millions of claims for the past mis-selling of PPI policies has proved lucrative for the claims firms, who have encouraged tens of thousands of people to use their services, for a charge,In the past year, the banking industry's exposure to millions of claims for the past mis-selling of PPI policies has proved lucrative for the claims firms, who have encouraged tens of thousands of people to use their services, for a charge,
However, individuals can make a PPI claim themselves for nothing.However, individuals can make a PPI claim themselves for nothing.
The MoJ revealed last week that the "vast majority" of complaints it received from consumers related to CMCs which offered to run claims against financial services firms, with PPI being the standout example.The MoJ revealed last week that the "vast majority" of complaints it received from consumers related to CMCs which offered to run claims against financial services firms, with PPI being the standout example.
About three quarters of complaints were about CMCs specialising in PPI, most of which came from between 15 to 20 firms.About three quarters of complaints were about CMCs specialising in PPI, most of which came from between 15 to 20 firms.
The MoJ acknowledged that these businesses were not necessarily typical of the wider industry.The MoJ acknowledged that these businesses were not necessarily typical of the wider industry.
But the authorities want to ensure the whole claims industry will be run under much tougher rules within the next year.But the authorities want to ensure the whole claims industry will be run under much tougher rules within the next year.
"Time and time again we see examples of consumers who have inadvertently agreed to a contract with a CMC without a written contract in place," said Kevin Rousell, head of claims management regulation at the MoJ."Time and time again we see examples of consumers who have inadvertently agreed to a contract with a CMC without a written contract in place," said Kevin Rousell, head of claims management regulation at the MoJ.
Further changesFurther changes
Claims firms have been regulated by the MoJ and its CMRU since 2007.Claims firms have been regulated by the MoJ and its CMRU since 2007.
In that time, more than 700 outfits have been banned or closed down by the regulator.In that time, more than 700 outfits have been banned or closed down by the regulator.
There are still about 3,000 such firms in existence in England and Wales, typically authorised to run claims for personal injury compensation.There are still about 3,000 such firms in existence in England and Wales, typically authorised to run claims for personal injury compensation.
Among the other changes being proposed, claims firms will also no longer be able to state they are regulated by the MoJ - only by the CMRU.Among the other changes being proposed, claims firms will also no longer be able to state they are regulated by the MoJ - only by the CMRU.
This is to stop clients being misled into thinking a firm is endorsed by the ministry.This is to stop clients being misled into thinking a firm is endorsed by the ministry.
The CMC firms will also have to tell their clients if they are suspended from business, or have had their authorisation altered.The CMC firms will also have to tell their clients if they are suspended from business, or have had their authorisation altered.