Ministry of Justice clampdown on claims marketing
Companies that currently offer financial reward to attract people to make compensation claims will be stopped under new proposals.
Curently, some companies promise people a cash incentive – for example: 'We’ll pay you £200 immediately after our solicitors approve our claim'. In Lord Young of Graffham’s report on compensation culture, Common Sense, Common Safety, concerns were raised about these marketing practices. Lord Young wrote to the Head of Claims Management Regulation to set out specific concerns about claims management businesses and the use of inducements that might encourage claims being made. This form of marketing for claims management businesses is currently regulated under the Compensation Act 2006.
In response to this, the Ministry of Justice is currently engaged in a consultation to change the rules governing claims regulation and the proposals include stopping the use of financial inducements.
The consultation paper invites views on two proposals. The first sets out on the proposal to prohibit the offering of financial or similar benefits as an inducement for making a claim by amending Client Specific Rule 6(b) of the Conduct of Authorised Persons Rules 2007.
The second sets out on the proposal to make technical updates to General Rules 7, 12 and Client Specific Rule 2 as a result of changes in the regulatory structure which have an impact on the current rules. This is primarily aimed at persons authorised to provide regulated claims management services in England & Wales under the Compensation Act 2006.
The consultation closes on 10 February 2011 and subject to the outcome of consultation the Ministry of Justice plans to implement the rule change in April 2011, in line with Lord Young’s published implementation timetable.
If you would like to find out more about the consultation documents, please visit
http://www.justice.gov.uk/consultations/consultation-cp1910.htm
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