Claims management companies (CMCs) are advised to read the recent guide published by national law firm Freeth Cartwright, which explains some of the key aspects of the regulatory regime relating to claims management.
Penalties and Fines
Scott Robert, a trusted compliance consultant in the UK, says the guide begins by highlighting that penalties available to the Claims Management Regulator include imposing restrictions on the activities a CMC can carry out or suspending or withdrawing a company’s authorisation. New rules were also mentioned, such as the need to provide evidence to substantiate claims made.
The next issue discussed is that local Trading Standards departments have the power to apply to the county court for an order to forbid a CMC from breaching the same regulations again. This usually relates to breaches of the Consumer Protection from Unfair Trading Regulations. Failure to comply with this court order could lead to imprisonment.
Alternatively, Trading Standards can commence proceedings in a Magistrates Court, where fines of up to £5,000 can be imposed. They may also ask the magistrate to transfer the proceedings to a Crown Court, where unlimited fines and/or imprisonment may result.
Whilst many CMCs think of the Claims Management Regulator at the Ministry of Justice (MoJ) as their regulator, these companies also need to comply with the requirements of other bodies. It has been demonstrated how Trading Standards can take action against CMCs. However, the Information Commissioner’s Office can also impose fines for breaches of the Data Protection Act or the Privacy and Electronic Communications Regulations. These fines may be around £500,000. The MoJ can now also impose fines on CMCs.
Another recent change is that complaints about CMCs can now be referred to the Legal Ombudsman if the customer is not satisfied with the way their CMC has resolved the matter. The Ombudsman can order companies to pay compensation of up to £30,000.
If a company is being wound up, any previous breaches of the rules relating to claims management can lead to disqualification applications for directors of the company. These disqualifications can last up to 15 years.
The regulatory environment for CMCs is constantly changing. Now may be a good time for a CMC to have a comprehensive, independent audit of its practices and procedures. Through these, any issues can be highlighted and corrected before the authorities pay a visit.