MoJ to force claims management companies to use written agreements

The Ministry of Justice is to force claims management companies (CMCs) to obtain written agreements from their clients before they take fees from them.

Earlier this month, the MoJ announced that CMCs would be banned from offering clients cash incentives, shopping vouchers or goods if solicitors accepted their cases.

The MoJ proposes, in a consultation launched this morning, that a new rule should state: “A contract between a business and a client must be signed by the client, and the business may not take any payment from the client until the contract is signed.”

In further changes, CMCs would no longer be able to imply that they are approved in any way by the government, or describe themselves as ‘regulated by the Ministry of Justice’ but will have to use the words ‘regulated by the claims management regulator in respect of regulated claims management activities’.

They would also be required to inform clients of any suspension or variation to the firm’s authorisation.

Head of claims management regulation Kevin Rousell said: “I want people to have time to think through their arrangement and be happy and clear about exactly what the deal is before they part with any money.

“Earlier this month I said the industry will be subjected to radical changes over the next 12 months with tougher rules put in place. I am pleased to announce the next step in our efforts to drive malpractice out of the industry.

“Time and time again we see examples of consumers who have inadvertently agreed to a contract with a CMC without a written contract in place. We want consumers to be better protected by making the terms of any contract clearer.”

A further proposal in today’s consultation paper would see CMCs being banned from charging fees, where, in settling a PPI claim, a bank paid off a loan or overdraft and there was no additional money to pay claims managers.