The Ministry of Justice will next year be given powers to fine rogue claims management companies in an amendment to the Financial Services (Banking Reform) Bill.
The MoJ revealed in a statement today (12 November) that its claims management regulation unit will also hire more enforcement staff, funded by a hike in fees paid by regulated CMCs.
Details of the maximum fine levels have yet to be published.
New rules will require CMCs to ensure the claims they submit have a realistic chance of success, and that they provide full evidence to back up allegations.
Companies will also have to ensure leads are not generated through illegal marketing texts and calls.
According to the MoJ, the number of CMCs operating has dropped from 3,400 in 2011 to 2,300 currently.
Justice Minister Shailesh Vara said: “We will not tolerate companies which waste hardworking people’s time and money through their own laziness, incompetence or frankly dubious practices.
“We are already making sure rogue companies are shut down – and now we are ensuring those who are wasting everyone’s time will pay for it.”
Kevin Rousell, head of the Claims Managemement Regulation Unit at the MoJ, said: “We do not tolerate bad practice and continue to take action against companies which break the rules, including removing their licence to trade.
“Issuing fines will be an important new weapon for us.”
As well as employing more staff to tackle irresponsible practice by claims firms, the government will strengthen the CMR unit by appointing independent regulatory experts in non-executive roles and will commission a comprehensive review of the independence of the current Claims Management Regulator’s governance arrangements.
