Claims Management Companies (CMC) will have to get written agreement from clients before pursuing claims and charging a fee under tough new conduct rules to be introduced by the Claims Management Regulator this summer.The new conduct rules come on top of the ban on referral payments by solicitors to CCMs for personal injury claims from 1 April 2013.
Solicitors receiving referrals from CCMs should ensure their risk management procedures can identify whether CCMs are following the new rules according to James Burgoyne, Director, Brunel Professional Risks. “If a claim introduced to a solicitor by a CCM goes wrong we expect professional indemnity insurers will want to know whether all the referral rules were properly followed,” he warns.
A Ministry of Justice press release says that the following rules will come into force this summer:
- CMCs must agree contracts in writing with their clients, before any fees can be taken
- CMCs must refer to their regulatory status as being regulated by the claims management regulator
- CMCs must inform clients if they are suspended or restrictions imposed on their business within 14 days of the enforcement action being taken.
Head of Claims Management Regulation at the Ministry of Justice, Kevin Rousell says “These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer. Enforcing new rules will help to drive malpractice out of the industry and improve reputation for the vast majority of CMCs that do follow the rules.”
According to the BBC, 260 firms had their licences withdrawn in the last financial year for cold-calling potential customers without prior permission. Further information on the new rules can be found in the Ministry of Justice’s Claims Management Regulation Bulletin.