New rules regulating Claims Management companies have "let consumers down"
The latest Government acronym the CMR (Claims Management Regulator) has recently announced new rules governing Claims Management companies. New rules, that are, apparently “extremely disappointing”.
The Citizens Advice (no longer a Bureau) have been campaigning for tougher regulation on the firms who chase you (and ambulances) in the hope of making a fast buck. Citizens Advice wanted the following tougher regulations to apply:
Barred from cold-calling.
Ban on charging up front fees.
Charges and fees should only be in proportion to the compensation gained and paid at the time of payout.
All contracts to be signed in writing by the consumer.
A standard written contract that provides clear consumer information on risks and cooling-off rights.
While you might wonder at the legality of any company being enforceably engaged without a signed written contract in place, this is the only recommendation the new CMR have seen fit to introduce- firms must agree contracts in writing with their clients, before any fees can be taken, and must refer to their regulatory status as being regulated by the claims management regulator - rather than the Ministry of Justice. The regulator has also banned advertising that offers "vulnerable" individuals a cash incentive for signing up to use their services.
CMR head 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. These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer.”
However, Gillian Guy, Citizens Advice Chief Executive retorted:
“Too many people have been ripped off by these predatory firms who use underhand tactics to make money from people who often don’t have a claim to make.
“The new Conduct Rules are extremely disappointing. The regulator has let consumers down by not banning upfront fees, barring firms from cold calling or making sure fees are in proportion to the compensation gained.”
Currently, around 3,000 claims management companies are licensed to provide claims management services; around 1,900 licensed for personal injury and 1,100 for financial claims, largely PPI focussed. Between April 2011 and March 2012, 260 claims management companies had their licences removed.
In 2012 Citizens Advice Bureaux dealt with over 16,500 problems with PPI, a third more than in 2011. Just under 3,300 of these were about claims management companies. Between April and October 2012, the Citizens Advice consumer service handled over 4,800 queries about claims management companies offering PPI compensation services.
Citizens Advice research found that 9 out of 10 people were pestered by calls, emails and spam texts from these firms within 12 months. While advice is to never reply to spam texts (even if prompted to send STOP or the like) you can forward spam texts to your provider to deal with- 7726 for Everything Everywhere or O2, 37726 for 3, 87726 for Vodafone.
They also found that:
2 in 3 Claims Management companies don’t tell people how much they would charge for their services
72% don’t say when they will charge their fees
4 out of 5 do not give information about their cancellation rights
just 43% say what would happen if you took out a claim
and less than half were clear about people’s chances of success
1 in 5 CAB clients were lead to believe they could make a claim for PPI – even if they had never been sold a policy. Claims companies take around 25% of a person’s successful PPI claim in charges, even though you can do it yourself very easily for absolutely nothing.