Anyone that has felt harassed by nuisance calls from marketers and robotic calling systems will be pleased to know that the net has been closing in on the claims management companies (CMCs) that engage in these practices. Consequently the number of CMCs registered to handle personal injury claims fell by nearly 50% in 2014.
On top of that, new plans announced by Justice Minister Lord Faulks QC make it clear that a CMC using information gained via illegal unsolicited communications (for example, cold calling or spam texts) could be fined up to 20% of its turnover.
For larger CMCs, this could mean fines totalling millions of pounds.
Big Fines for Rogue CMCs and Nuisance Marketing
Certain CMCs, dubbed ‘rogue’, have been thought to be a nuisance due to their methods of marketing, particularly through the practice of making persistent and purely speculative calls or texts to prospective customers. The new rules, issued under the Financial Services (Banking Reform) Bill 2013, aim to curb such behaviour.
The rules are the latest in a series of measures aimed at reforming the claims management industry. At present, claims companies are subject to fines for making ‘spurious or unsubstantiated’ claims as well as for any ‘misleading marketing’.
However, the introduction of penalties as a proportion of the revenue of a company is a first for the industry.
Aligning Regulation with the Solicitors’ Code of Conduct
The Solicitors Regulation Authority’s Code of Conduct makes it clear that solicitors are prohibited from using methods such as cold calling to conduct business.
As claims management companies do not come under the remit of the SRA, the industry had originally faced minimal legal scrutiny. With the public commonly under the assumption that these claims management companies were actually solicitors firms, the new rules aim to further close this gap in accountability.
The introduction of fines linked to revenues for speculative calling not only punishes companies utilising these bad practices but rewards those companies – via a market featuring fewer players – who make sure they do not market themselves this way.
Rogue companies that flout the regulations will increasingly face the threat of closure, as their business practices become more expensive.
Cold calls from companies purporting to offer legal advice and/or represent a case should be assumed to be made by a claims managements company and not from a solicitor.
Therefore, when querying the merits of a prospective claim, genuine claimants are advised to contact a solicitor directly. In doing so, any subsequent advice, claims handling, and representation is subject to the law, codes of conduct and expectations which guide a highly regulated profession.