Policy background Claims Management Services
Claims management companies are businesses which provide advice and / or other services in relation to the making of compensation claims for personal injuries, financial products and services, employment issues, industrial and criminal injuries and housing disrepair. There are currently around 1,400 authorised claims management companies in operation.
	The Claims Management Regulation Unit was established in the Ministry of Justice in April 2007, and regulates claims management companies active in England and Wales. This was intended to be an interim measure.
	However, there is evidence of malpractice in the sector and a number of complaints have been leveled at claims management companies. Common complaints included poor value for money, misrepresentation of the service offered to consumers, and reliance on nuisance tactics, such as unsolicited calls and texts. As a result, consumers have become distrustful of claims management companies, with 76% of the public having reported that they are not confident that the companies tell the truth to their customers.
	At Summer Budget 2015, the Government commissioned an independent review, led by Carol Brady4, to examine claims management regulation and make recommendations to improve conduct in the sector. Following this review, the Government announced at Budget 2016 its intention to establish a tougher regulatory regime for claims management companies by transferring supervisory responsibility from the Ministry of Justice to the Financial Conduct Authority.
	Part 2 of the Act makes amendments to the Financial Services and Market Act 2000 to enable the Financial Conduct Authority to regulate claims management company activity as a ‘regulated activity’ under the Act.
	The Act also provides for the transfer of complaints-handling responsibility from the Legal Ombudsman to the Financial Ombudsman Service. This will allow the Financial Ombudsman Service to take over jurisdiction to investigate and determine consumer complaints about the service provided by the claims management companies.
	The Financial Conduct Authority, and relevant legal services regulators (the Law Society of England & Wales, the General Council of the Bar and the Chartered Institute of Legal Executives) have been given the power to impose a cap on the fees that claims management companies can charge for their services, and the Financial Conduct Authority and Law Society of England & Wales a duty to exercise this power in respect of financial products or services.
	The Law Society of Scotland has been given a power to make rules in relation to a financial product or service and the Treasury has been given the power, with the consent of Scottish Ministers, to extend this power to other claims management services.
	The Act also provides for the introduction of an interim fee cap on services in relation to payment protection insurance (PPI) claims, in order to ensure consumers are protected against excessive fees before the Financial Conduct Authority and the Law Society of England & Wales implement their financial services fee cap. This is especially pertinent given the PPI complaints deadline in August 2019 and preceding communications campaign, during which time complaints volumes are expected to rise.
	The Act provides for a ban on cold calling (unless prior consent has been given) by amending the Privacy and Electronic Communications Regulations. This will add to the Government’s package of measures to tackle unsolicited marketing calls.
	The Act also includes a power for the Ministry of Justice to put into place a transfer scheme for assets and liabilities of the Claims Management Regulation Unit to the Financial Conduct Authority, and a scheme providing for the transfer of staff.