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Regulation of claims management services commences

DEPARTMENT FOR CONSTITUTIONAL AFFAIRS News Release (042/07) issued by The Government News Network on 23 April 2007

EMBARGOED UNTIL 0001HRS MONDAY 23 APRIL

Full regulation of claims management services begins today.

From today all claims management companies will be regulated by the Department for Constitutional Affairs. Those authorised to provide the regulated services must follow strict rules of conduct. This will ensure that consumers are given clear information about the options available for pursuing their claim. If an authorised person fails to comply with the rules, the Regulator will be able to take disciplinary action.

The regulation will help:

* reduce malpractice including high pressure selling;

* stop unauthorised marketing activity in hospitals;

* reduce misleading advertising;

* deliver clearer and more transparent contracts; and

* ensure that authorised persons have a clear mechanism for dealing with consumer complaints.

A baseline study has also been published today which provides an analysis of the sectors being regulated and outlines the strategy for dealing with malpractice.

Bridget Prentice said:

"I am delighted to announce today the full commencement of claims management regulation. Appropriate action will be taken against those who wilfully flout the law.

The strict rules with which authorised persons must comply will help raise consumer confidence. The regulation has put in place vital safeguards for consumers when using the services of claims management companies and I am confident that it will also help raise standards across the industry.

The regulation has been delivered in record time and I am grateful for the widespread support that has made this possible. I hope we can continue to work together to make regulation more effective".

Around 800 organisations have so far been authorised, and the authorisation process is continuing for applications received after the initial deadline of 16 February. Consumers will be able to check if a company is authorised by using the search facility for authorised persons provided on the Claims Management Regulation website at http://www.claimsregulation.gov.uk. Consumers can also call the claims management regulation general enquiry number on 0845 450 6858.

Notes for Editors

1. The Compensation Act 2006 received Royal Assent on 25 July 2006. Part 2 of the Act establishes a statutory framework for the regulation of claims management services. It is now prohibited to provide the regulated services unless authorised or exempt. The Regulator has powers under the Act to take action against persons suspected of providing regulated services without authorisation (if found guilty the maximum penalty is 2 years imprisonment or a fine or both), and against authorised persons suspected of breaching the rules or unprofessional conduct. A finding of professional misconduct could lead the Regulator to vary, suspend or cancel a person's authorisation.

2. Once authorised, businesses will have to comply with strict rules of conduct including:

* a prohibition on cold calling in person;

* a prohibition on high pressure selling;

* transparent contracts;

* disclosure of referral fees, and

* complaints procedure.

3. The regulation will initially apply to claims in respect of -

- Personal injury

- Criminal injuries compensation

- Employment

- Housing disrepair

- Financial products and services

- Industrial injury disablement benefits

4. Under the current arrangements, the Secretary of State for Constitutional Affairs is formally the Regulator. A Head of Regulation has day to day responsibility for the operation of the regulation and takes decisions on behalf of the Secretary of State. Mark Boleat has been appointed to this position until August 2007. Staffordshire County Council Trading Standards Unit is providing the DCA's Monitoring and Compliance function under contract. The Unit manages the authorisation process and also carries out the monitoring and compliance work.

5. The designated website provides guidance and comprehensive information on the authorisation process and other aspects of the regulation. The baseline study is available on this website under publications and on the Department's website http://www.dca.gov.uk.

6. Over 1000 applications were received by the deadline (16 February), a considerable number arrived after that date. It is not the intention to take enforcement action against these businesses provided they have applied with a full and complete application and the business is complying with the regulatory rules.

7. There is a slight time lag between a business being informed they are to be authorised and going on the website. This is because they must pay the annual fee to complete the process. Therefore although around 800 businesses will have been authorised by 23 April not all names will be on the website at that date.

ENDS