New Government powers to fine rogue claims management firms

Nuisance companies sending out spam texts and cold calls will face hefty new Government fines.

A major crackdown is to be launched giving the Government new powers to fine rogue claims management companies (CMCs) for the first time.

Companies sending out spam text messages, cold calling and providing poor quality services will be under the spotlight. Those using misleading advertising or taking payments from customers before claims are finalised will also be punished.

CMCs, sometimes referred to as 'ambulance chasers', will be required to make sure all claims they submit have a realistic chance of success and are backed up with appropriate evidence. Audits will need to be carried out to show how data is collected in an attempt to stamp out illegal marketing texts and calls.

The Government’s action so far has pushed down the number of claims firms operating from 3,400 in 2011 to 2,300 today. 

Justice Minister Shailesh Vara said: "We will not tolerate companies which waste hardworking people’s time and money through their own laziness, incompetence or frankly dubious practices.

“We are already making sure rogue companies are shut down – and now we are ensuring those who are wasting everyone’s time will pay for it.”

The Ministry of Justice is this week consulting on the new set of rules. These will be added to the Banking Reform Bill as an amendment and confirmed at a later date.

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Payment protection insurance

The number of CMCs in operation has rocketed since the payment protection insurance (PPI) scandal. These companies regularly bombard us with texts, calls, emails and TV adverts offering to put forward PPI claims, in return for a cut of around 30% of any compensation money received.

But these firms have been accused of flooding banks and building societies with unsubstantiated claims, at the cost of other customers. The idea of these new rules is that will be easier for banks to work through legitimate claims, speeding up the time and cost of the process for everyone involved.

It’s not necessary to go through a CMC as you can make an individual claim through your bank for free. If you think you were mis-sold PPI insurance, which was typically included in loans or credit cards, you can apply for compensation.

To do this you’ll need to contact the PPI provider directly. You can then involve the Financial Ombudsman Service (FOS) if it doesn’t provide an adequate response within eight weeks. The FOS has an online questionaire which you'll need to fill in detailing exactly what has happened. It will then look at your case and determine whether you're eligible for compensation.

Read more in How to claim your PPI compensation

How big should the fines be for rogue companies and what would you include in the rules? Let us know in the comment box below.

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More on PPI:

Add-on insurance: the next PPI?

Banks ask for PPI claim deadline

The real result of PPI mis-selling

'Serious faults' found with PPI handling

Building societies bombarded with bogus PPI claims

Millions plagued by 'completely unacceptable' PPI cold calls