Editor, Solicitors Journal

Rogue claims management company hit with first fine by regulator

5 Aug 2015News

Official figures show claims industry is contracting as new regulatory powers begin to bite

A rogue claims management company (CMC) responsible for bombarding people with millions of nuisance calls has become the first to be fined under new regulatory powers.

The Hearing Clinic has been fined £220,000 by the Claims Management Regulator (CMR) following hundreds of complaints from members of the public who received speculative calls about claims for noise induced hearing loss.

Many of those called by the CMC were subscribers to the Telephone Preference Service (TPS), which indicates they did not want to receive such calls.

The hefty fine is the first to be issued by the regulator, based at the Ministry of Justice (MoJ), since the government introduced new fining powers in December 2014.

Additional conditions have also been imposed on The Hearing Clinic, including restrictions around calling numbers registered on the TPS and using data from third-party companies. The firm could face further sanctions including suspension and closure if they break the rules again.

As SJ previously reported, firms found breaching the regulator's rules of conduct now face fines of up to 20 per cent of their annual turnover, as well as having their trading licence suspended or removed.

Kevin Rousell, head of claims management regulation at the MoJ, said: 'The new fines mean we have greater powers to crack down on claims management companies that make nuisance calls. Companies should be in no doubt that if they break the rules then we won't hesitate to fine them in addition to the tough action we already take.'

Shrinking industry

The penalties are the latest in a series of moves by the government to rid the industry of rogue firms, which already includes banning CMCs from taking fees from customers before a contract has been signed and naming firms which are subject to enforcement action or under investigation.

New figures show that 296 CMCs received warnings from the regulator in 2014/15 and 105 had their licences removed. Figures also show that the number of firms registered to handle personal injury claims has fallen from around 2,300 at the start of 2013, to 959 at the end of July 2015.

The total number of companies in the claim management industry has fallen by 300 this year, to 1,752. At its peak in 2011, the industry was comprised of 3,367 firms.

The justice minister, Lord Faulks QC, commented: 'The government has taken action to help people who are having their time wasted by the unscrupulous practices of some claims firms out to make themselves a profit at others' expense. The new fines we introduced mean that companies who break the rules will pay the price.'

In July, the Chancellor George Osborne announced a major review of the regulation of CMCs and a cap on the charges they can apply to customers.

Giving his Budget speech, Osborne said the government intend to scrutinise the regulation of CMCs which will be led by Carol Brady, chair of the Chartered Trading Standard Institute's Board. The review will report to HM Treasury and the MoJ in early 2016.