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100th claims management company loses authorisation

18 August 2009

A hundred claims management companies have lost their authorisation to provide services since regulation was introduced in April 2007, the Ministry of Justice has announced.

Kevin Roussel, head of regulation at the MoJ, said he had cancelled the authorisation certificates of companies for reasons ranging from criminal convictions for fraud to misleading marketing, failing to pay licence fees or provide him with information.

Authorised claims management companies must pay a one-off fee of at least £450, followed by an annual regulation fee depending on turnover to retain their certificate of authorisation.

“The majority of claims management companies registered with the Ministry of Justice are operating within the rules,” Roussel said.

“However, some companies choose to flout those rules and some also target consumers who find themselves in debt. People desperate for a way out of their financial troubles can be vulnerable to the misleading marketing that we are continuing to tackle.

“People may have paid large up-front fees for a service that doesn’t live up to the marketing hype, and in the case of debt-related claims find themselves still liable to pay all their debts in full.”

Roussel said there was a trend towards high pressure cold calling from call centres, including unsubstantiated claims and encouraging people to hand over fees on the spot.

“Consumers must be given clear information about the options available for pursuing their claim, realistic chances of success and the costs of doing so,” he said.

Earlier this year the SRA warned solicitors that they risked disciplinary action if they bought consumer credit claims from claims managers (see Solicitors Journal 24 February 2009).

The move followed a warning by Justice Minister Bridget Prentice that companies making dubious claims about freeing consumers from credit card or loan agreements could lose their authorisation.

Authorised companies are banned from cold calling in person, must disclose referral fees and allow a two-week cooling-off period after contracts are signed.

Those operating in the field of personal injury must also hold professional indemnity insurance.

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Risk & Compliance Company, Consumer, and Contract Trade Costs