History
Claims management companies developed rapidly from about 2000 in response to legal and regulatory developments. The method of operation of some companies rapidly began to cause concern. In 2004 a Report by Citizens Advice, No win, no fee, no chance - CAB evidence on the challenges facing access to injury compensation, described some of the problems.
In September 2004, the Better Regulation Task Force (BRTF) published a report Better routes for redress. This examined how the prevailing compensation system worked, and made recommendations on how access to redress might be improved. On 10 November 2004, the Government Response was published.
On claims management companies, BRTF had recommended that the Claims Standards Federation (then the trade association in the sector) should apply to the Office of Fair Trading for approval of its code of practice in which it set out how claims management companies should operate, and that the Federation should work towards the approval of its code by the OFT by September 2005. The government accepted that the successor body to the Claims Standards Federation, the Claims Standards Council (CSC), “appears to provide the opportunity to make significant progress now towards better regulation and to ensure consumer interests are safeguarded”.
In a speech on 22 March 2005, the Lord Chancellor expressed disappointment that, despite signs of broad support for the CSC, only a small proportion of claims management companies had joined. He went on to say that “claims management companies have failed to demonstrate anything like the commitment that I would hoped to have seen by now”. He announced that the government would legislate to bring the claims management sector within the regulatory net through legislation on reforming the market for legal services. He envisaged a frontline regulator with oversight by the proposed Legal Services Board. That frontline regulator could be the CSC. He said he would welcome proposals from the CSC on how it intended to develop its current role and what it could do to help deliver the watertight regulatory regime that was required.
On 17 October 2005, the government published a White Paper on regulation of the legal services industry which included more details on the proposed Legal Services Board and the relationship between it and frontline regulators. On 3 November 2005, the government published the Compensation Bill. The Final Regulatory Impact Assessment provides a comprehensive analysis of the marketplace and the regulatory options.
The government commissioned Mark Boleat to consider whether the Claims Standards Council could be in a position to be the front line regulator. His Report and the Council’s Response to it led Ministers to decide that the Council could not be the Regulator. After consideration of the various options it was decided that the Secretary of State should formally be the Regulator, with monitoring and compliance work outsourced to a local authority trading standards service. This is an interim arrangement until the Legal Services Board is established.
The legislation received Royal Assent on 25 July 2006.
Consultation
Consultation on secondary legislation began prior to Royal Assent and was largely completed in November 2006. The consultation documents were –
Consultation on Part 2, the Scope Order under Clause 3(2)(e); Regulations under Clause 8 and the Schedule; and the Conduct Rules. (6 July 2006)
Consultation on the Application Form for seeking authorisation and Fee Scales. (14 August 2006)
Consultation on exemptions from the requirements for authorisation. (8 September 2006)
Consultation on the draft code of practice for trade unions. (6 October 2006)
Consultation on The Claims Management Service Tribunal Draft Rules 2007. (10 October 2006)
On 30 November 2006, the Government published a summary of responses to the Consultations on claims management regulation.
The regulatory framework
The regulatory framework is set out in the primary legislation and various pieces of secondary legislation. These are described fully in the legislation and authorisation pages. In summary –
- The Compensation Act 2006 is the primary legislation.
- The Compensation (Claims Management Services) Regulations 2006 set out much of the detail including the requirements that have to be met in order to obtain authorisation.
- Other statutory instruments prescribe the activities and sectors covered by regulation, exemptions from the need to be authorised and appeals procedures.
- The Regulator makes rules covering the conduct of authorised persons and regulatory fees.
The regulatory structure comprises –
- The Secretary of State for Justice is formally the Regulator, and formal decisions are in his name.
- Day-to-day responsibility rests with the Head of Claims Management Regulation, who is a senior official in the Ministry of Justice.
- Responsibility for managing the authorisation process and monitoring and compliance work rests with a Monitoring and Compliance Unit, which is responsible to the Head of Claims Management Regulation. Staffordshire County Council was appointed in September 2006 to provide the service.
- A Regulatory Consultative Group has been established in order to ensure adequate stakeholder involvement in the development and operation of the regulatory regime. The Group includes representatives of claims management businesses, relevant regulators, trade associations and consumer groups and other interested bodies.
- A Claims Management Services Tribunal has been established to consider appeals in respect of authorisation and other decisions of the Regulator. The members of the Tribunal are the members of the Financial Services and Markets Tribunal.
If you would like to make a complaint about the service you have received from the Claims Management Regulation regime please complete the complaints form or phone 020 7210 8792.