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Claims firms set to receive penalties for time-wasting

5th Aug 2014

The Ministry of Justice has announced that rogue claims management companies that provide bad service and pester people with nuisance calls will soon face huge fines, based on annual turnover and the nature of its offences.

Set to be introduced later this year, the penalties will be issued to companies who break rules set by MoJ’s claims management regulator (CMR). These rules will address issues including using information obtained by unlawful, unsolicited calls and texts, wasting time and money by making unsubstantiated claims, and the use of misleading marketing.

The larger claims firms could face fines of up to 20% of their annual turnover, which may come to hundreds of thousands of pounds, potentially millions.

Justice Minister Lord Faulks QC stated that claims companies should no longer be able to bother hardworking people and waste people’s time, and that ‘the scale of these fines shows just how serious we are about stopping them’. The measure will also help reputable firms in the industry, as it should boost confidence in the services offered by the sector.

Andy Cullwick is head of marketing at First4Lawyers, the UK’s biggest independent marketing collective, and is pleased to see a move towards tackling the firms who still attempt to use unethical and outdated methods to generate business. His suggestion goes one step further though, believing that while the MoJ’s fines could deter the companies, ‘naming and shaming and removing the licence to practise of firms that flout the rules will be far more effective’.

He added that the largest firms will have spent more time and money ensuring their processes are ethical and fall under regulation, which could mean fines will be limited. However, smaller firms with poor methods could potentially continue in such a way under a different name, which is why Cullwick believes it is also important for the Ministry of Justice to ensure there are no loopholes in the rules.

There just over 2000 claims management companies in the UK, licensed to provide services in cases of personal injury, mis-sold financial products and services, employment and redundancy, criminal injury, industrial injury, and housing disrepair.