Claims Management Regulation - MOJ report

[Paule]

Claims Management Regulation

Impact of Regulation Assessment – Update

A report by Mark Boleat for the Ministry of Justice
July 2009

Introduction
The Compensation Act 2006, providing for the regulation of claims management services, achieved Royal Assent on 25 July 2006. The regulatory regime, including the regulations and rules, was quickly put in place, applications for authorisation were invited from 30 November 2006, and the offence of operating without authorisation was commenced on 23 April 2007.
In August 2007 an initial assessment of the impact of regulation was published. In April 2008 a second study reviewed the impact of regulation over its first full year of operation. The approach was to take the objectives of regulation, quantified to some extent in a Baseline Study, as the starting point. The various regulatory processes were then examined. The main part of the paper made an assessment of the impact of regulation in each of the sectors subject to regulation.
This third study reviews the impact of regulation after two years. It is essentially a brief update of the one year study, but with a specific chapter on a new area – enforceability of consumer credit agreements. The author is grateful to the staff of the Claims Management Regulator, in both London and Burton-on-Trent, and to the various trade associations and individual businesses that fed in their views.

Mark Boleat, 13 July 2008

[Paule]

Re: Claims Management Regulation - MOJ report

The Impact of Regulation

15.17 The collective response from the various regulators has so far not been sufficient. This partly stems from the number of regulators and other agencies involved, but this is a matter to be sorted out within Government. Consumers are entitled to expect a joined-up response.
15.18. The succession of warnings by the Claims Management Regulator, the Office of Fair Trading and the Solicitors Regulation Authority have served a useful purpose but those engaged in serious malpractice are less likely to be influenced by warnings but rather are influenced by enforcement action.
15.19 While some enforcement action has been taken, particularly in respect of misleading advertising, much more needs to done in the circumstances. Removing misleading advertising from websites is desirable but not nearly sufficient if sales calls are even more misleading. At present, there seems a real danger that a number of consumers have been led to believe that their consumer credit debts are unenforceable when they probably are enforceable, that unknown to them they are putting themselves in a position whereby they may find it more difficult to obtain credit in the future and they may well have parted with up to £500 in an up-front fee on the basis of misrepresentation at what could be achieved.
15.20 This issue needs to be tacked more urgently and to do so is likely to require significant additional resources, and in relation to the Claims Management Regulator beyond what is currently available. The SRA and the OFT both have a direct responsibility in this area. Solicitors are not only handling claims passed on by claims management businesses but are also seeking claims directly, and the OFT has responsibility for regulating consumer credit and debt counselling and for consumer protection generally. A joint approach by these three bodies, with one clearly in the lead, accountable and providing the necessary resources is needed.