Ban on CMC enticements sees thousands leave personal injury industry

This article was published on: 07/24/13

Scott Rees logo

The changes to the law that banned claims management companies (CMCs) from offering cash or gift enticements as well as paying referral fees has seen thousands leave the personal injury industry.

The latest figures released from the Claims Management Regulation Unit (CMRU) revealed that the number of CMCs registered to handle claims of this nature had dropped from 2,435 in March 2012 to 1,700 in June 2013.

Implementing the ban since April this year, the CMRU have visited more than 450 CMC‘s across England and Wales which has led to investigations of a further 141 with 7 having action taken against them and 13 surrendering their license to trade.

Justice Minister Helen Grant has heralded the success of the ban saying: “We have taken strong action to reign the rogue firms which have gathered in this sector and the impact is now starting to show.

“Ending these fees which fueled a growing compensation culture has been an important step to reducing the cost of living for ordinary people – who have ultimately been footing the bill for them through their insurance premiums.”

These views were echoed by the head of the CMRU, Kevin Rousell, who added: “It is our absolute priority to protect customers and we are making certain that firms are following the rules at a time of major change for the claims management industry.

“We do not tolerate bad practice and continue to take action against companies which break the rules, including removing their licence to trade. We shut down more than 200 last year.”

The rules that were introduced to the industry but the CMRU that have had such success include a ban on fees being taken before a written contract has been agreed and signed, a ban on cash of gift enticements to bring in profitable claims and firms being ordered that they must tell clients within 14 days if enforcement action has been taken against them.

Attention from the personal injury industry will now turn to the Solicitors Regulation Authority (SRA) and the Financial Conduct Authority (FCA) and whether or not they will follow the CMRU‘s lead and implement a ban on enticements.

Yesterday the Motor Accident Solicitors Society (MASS) tweeted:

Ban on enticements to claim has helped to clean up CMC industry. Will SRA and the FCA follow suit?”