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Kevin, firstly can you tell us a bit about your work at the Claims Management Regulation Unit.
I oversee and direct the operation of the regulatory and legislative system, taking statutory regulatory decisions on behalf of the Secretary of State. Such decisions include the authorisation, suspension and cancellation of the authorisation of a CMC to provide claims management services. I am supported by a small team of London HQ based MoJ officials and a Compliance Office (provided by Staffordshire County Council under contract to the MoJ), which leads on the processing of applications, monitors compliance, complaint handling, investigations and enforcement actions. The HQ team leads on stakeholder relations, communications, tribunal appeals, funding, and policy matters – keeping abreast of policy developments across government which may impact on the claims industry. Personal injury and financial products/services continue to be the most active claims sectors and therefore require the greatest regulatory focus.
What do you see as the Unit’s primary role in today’s shifting legal landscape?
Providing consumer protection remains our primary objective and we are delivering on this in a number of ways. As we continue to focus on driving out and preventing malpractice, we are adapting our regulatory processes to meet the demands of an evolving industry. This involves horizon scanning to ensure awareness of developments, trends and changes in the medium to long-term future and preparing for new claims areas, particularly in the financial claims sector.
What kind of demands are you and your team under on a day to day basis?
Our operational priorities are currently focused on a number of areas, in particular the financial claims sector and the personal injury sector which we continue to monitor closely. Our priorities include tackling malpractice in handling PPI claims by some CMCs, tackling misleading marketing, and working in partnership with a range of organisations and agencies (police forces and Insurance Fraud Bureau) to target businesses involved in insurance fraud. We are also working with the ICO and Ofcom (amongst other regulators and industry bodies) to identify the sources of unsolicited text marketing and tackle non-compliance with the rules.
You recently reported that in the last six months of 2012, 352 companies had been shut down, suspended or warned for bad practice. Why so many?
We have stepped up enforcement action and devoted more resources to tackling poor practices, leaving CMCs in no doubt that if they breach the rules they will face investigation and appropriate enforcement action. We take a targeted and proportionate approach to when, how and why we intervene. This includes issuing warnings and placing statutory restrictions on the taking on of business by some CMCs, which helps protect the position of existing clients while dealing with the bad practices.
Are you concerned that bad service, misleading marketing or hidden charges are becoming the new norm amongst certain types of firms?
Clearly there are some serious conduct problems among a minority of CMCs. We are all too aware that the reaction of the claims industry to the mass mis-selling of payment protection insurance (PPI) has also brought with it a fall in compliance standards and an increase in poor practices. In response, we established a specialist PPI Compliance Team which has already conducted a comprehensive programme of audits and taken action where problems have been found – and more proactive work is underway. To support this compliance work, we are working with the Financial Ombudsman Service, Financial Services Authority and the major financial service providers to help identify non-complaint businesses, gather the objective evidence needed to focus resources and inspections, and help improve the claims process for consumers.
Are there any new trends emerging that could be cause for concern in the near future?
Nothing significant at this time. We do, however, take a co-ordinated approach to identifying and responding to emerging conduct risks, working in partnership with relevant regulators, complaints handlers and industry bodies to identify problems early on and take action to restrict or prevent malpractice. These include partnerships with the Solicitors Regulation Authority, the Insurance Fraud Bureau, the Information Commissioner’s Office, Financial Ombudsman Service and Financial Services Authority.
What is the Government doing to protect consumers?
We all want a stable and robust regulatory system that the public can trust, and it is with this objective in mind that we are taking forward a programme of reforms later this year that will strengthen consumer protection. These include; tightening the CMC Conduct Rules so that the requirements of authorisation are made clearer to CMCs; a ban on CMCs offering financial rewards or similar benefits as an inducement to make a claim; and the Legal Ombudsman extending its role to act as an ombudsman for consumers with complaints about CMCs
Is there anything consumers need to look out for and is there some way they can check the credentials of a firm that’s making dubious marketing claims?
If consumers decide to use a CMC they must make sure it is authorised (licensed) by the Ministry of Justice. They can check this on our Authorised Business Search which tells you which CMCs are currently authorised and those that have surrendered or had their authorisation suspended or cancelled. It is advisable that consumers ‘shop around’ and make sure they fully understand the fees charged and any risks involved before entering into a contract.
What do you think are the biggest threats/ opportunities for the legal sector over the coming years?
There will be challenges for those working within the claims and legal sectors following the implementation in April of the reforms in Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. The reforms will return balance to the system and CFA claimants will now have an interest in the costs incurred on their behalf and in the way their claim is conducted. Defendants will be encouraged to defend cases where they are in the right, rather than settle them for fear of high costs should they lose. Additionally, the Act bans referral fees in personal injury cases, which will reduce the amount of money in the system and help to tackle the perception of a claims culture.
There will also be opportunities now that the licensing regime for alternative business structures (ABS) is operational. Under these arrangements, firms can be licensed to be partly or wholly owned or controlled by non-lawyers and provide legal or a mixture of legal and non-legal services. There will be opportunities arising from this new market and one newly licensed nationwide ABS has already announced plans to create 3,000 new jobs in the legal sector.