Tough new Conduct Rules for claims management companies (CMCs) have been announced.

Responding to concerns from consumer that bad practice by some CMCs continues to plague the industry, the Regulator is set to introduce a number of changes. This will includes an end to verbal contracts between consumers and CMCs and a requirement that a written contract must be entered into before a fee can be taken.

The new rules, which come into force in summer mean that:

• CMCs must agree contracts in writing with their clients, before any fees can be taken;
• CMCs must refer to their regulatory status as being regulated by the claims management regulator – rather than the MoJ which till now could be misconstrued as MoJ and government endorsement; and
• CMCs must inform clients if they are suspended or restrictions imposed on their business within 14 days of the enforcement action being taken.

As part of the industry wide crackdown, the Regulator has – from April 1 – also banned inducement advertising by CMCs. No longer will companies be able to target consumers through advertisements which offer vulnerable individuals a cash incentive for signing up to use their services.

Head of Claims Management Regulation, Kevin Rousell said:

‘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.

‘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.

‘Enforcing new rules will help to drive malpractice out of the industry and improve the reputation for the vast majority of CMCs that do follow the rules.’

The Regulator is focused on improving consumer protection and ensuring all CMCs are complying with the rules. The CMR industry is continuously evolving and the rules must be constantly monitored.