Rogue claims management companies that bombard people with nuisance calls and provide a bad service face fines totalling £1,000s under new plans announced by the Government.
The fines, due to be introduced later this year, will be brought against companies which break rules set by the Claims Management Regulation (CMR) unit at the Ministry of Justice , following a consultation it launched in November last year. (See how you can Reclaim PPI For Free without going to one of these firms.)
It will see claims management companies (CMCs), which mainly handle personal injury and financial services complaints, face penalties of up to 20% of their annual turnover.
Breaches could include using information gathered by unlawful unsolicited calls and texts, wasting people's time and money by making spurious claims, and using misleading marketing.
The CMR can already vary, suspend or cancel any firm's licence to operate (see the Over 200 rogue claims firms shut down MSE News story) but the fines are another step to rid the industry of bad practice.
It has also already banned firms from taking fees from customers before a contract has been signed, named firms which are being investigated and in April last year, it introduced a ban on referral fees in personal injury cases.
Bad practice 'bothers the public'
Justice Minister Lord Faulks says: "No longer should claims companies be able to plague hardworking people and waste everyone's time. The scale of these fines shows just how serious we are about stopping them.
"This is also good news for the reputable firms in this industry, as it will boost confidence in the services provided by the sector."
CMR head Kevin Rousell says: "Again and again we have seen examples of bad practice from CMCs that continue to plague the claims industry and bother the public.
"We already take tough action against companies which break the rules, but now these fines will help to drive malpractice out of the industry and improve the reputation for those who do follow the correct procedures."
You can claim money without a CMC
There are about 2,000 licensed CMCs, with some 1,200 covering the personal injury market and 1,000 for financial claims, though some operate in more than one sector. Their practices often lead to banks being flooded with unsubstantiated compensation claims, at a cost to other customers.
In the majority of cases, MoneySavingExpert.com warns against using these firms, as they take a cut of around 30% of what you reclaim when it can be done for free. (See Reclaim PPI For Free for more.)
Additional reporting by Paloma Kubiak.