The Government changed the law in December 2014 to allow the industry’s watchdog to issue fines for noncompliance with the applicable regulations. On 13 July the Claims Management Regulator’s (CMR) latest annual report 2015 made clear that if Claims Management Companies (CMC) failed to comply with the CMR’s rules of conduct, a full range of enforcement tools would be used. It hasn’t taken long for the CMR to issue its first fine, on 5 August, of nearly a quarter of a million pounds. The regulator’s target was a CMC that processed hearing loss claims.
The Hearing Clinic, a CMC based in Derby, has been fined £220,000 following hundreds of complaints about speculative calls regarding hearing loss claims. Many of those cold-called had subscribed to the Telephone Preference Service, which indicates that they did not want to receive such calls. In additions to the fine, trading conditions have also been imposed on The Hearing Clinic, including restrictions on calling numbers registered on the TPS and on using data from third-party companies. The company could face further sanctions including suspension and, where necessary, closure if it breaks the rules again.
The CMR has the power to impose fines of up to 20% of annual turnover, as well as suspending or removing a CMC’s trading licence. New figures show that 296 claims firms received warnings from the regulator in 2014 to 2015 and 105 had their licences removed. The total number of CMCs has fallen by a further 300 this year, to 1,752 from a peak of 3,367 in 2011.
Claims Management Regulator Kevin Rousell said: “Companies should be in no doubt that if they break the rules then we won’t hesitate to fine them in addition to the tough action we already take.”
Justice Minister Lord Faulks QC added, “The new fines we introduced mean that companies who break the rules will pay the price.”
It is noteworthy that the first significant fine relates to hearing loss claims. The Civil Justice Council has recently been tasked with considering this area and with making recommendations for procedural or other changes (possibly including costs reform). Its work is expected to be completed in the first half of 2016. It should also be borne in mind that in the recent summer budget Chancellor George Osborne announced a fundamental review of the regulation of CMCs, for which he set a timeline of six months.
About the Author
Jef Mitchell is a consultant at BLM and former Chief Claims Officer at the Ministry of Defence where he regularly briefed Ministers on claims issues and risk management. He now helps to lead the firm’s Policy and Government Affairs work with Alistair Kinley preparing submissions and supporting evidence for consultations and reform proposals, in addition to liaising with government departments and regulators on key issues and consultations affecting the firm and its clients. Jef is also an accredited mediator.