Oral contracts to be banned in claims clampdown
Claims management companies (CMCs) will be forced to end oral contract arrangements under rules proposed by the Ministry of Justice today.
The MoJ’s Claims Management Regulator (the regulator) will insist that CMCs have to agree contracts with clients in writing before any fees can be taken. Companies will also be required to inform clients of any changes to the business’s authorisation once in effect and will be allowed to say only that they are regulated by the regulator rather than the MoJ, which the ministry says implies government endorsement.
The changes are part of a rules review consultation and come on the back of an initial announcement earlier this month, when it was proposed that CMCs be banned from offering incentives to the public if their solicitors accept a case.
Kevin Rousell, MoJ head of claims management regulation, said: ‘I want people to have time to think through their arrangement and be happy and clear about exactly what the deal is before they part with any money.
‘Time and time again we see examples of consumers who have inadvertently agreed to a contract with a CMC without a written contract in place. We want consumers to be better protected by making the terms of any contract clearer.’
The consultation will also consider a possible ban on CMCs charging customers who are making a refund claim for payment protection insurance. There have been reports that consumers expecting a cash payment have seen their payouts automatically used towards paying off an existing loan, credit card or overdraft, leaving them to pay the CMC fees from their own pocket.
The consultation is now on the MoJ website and is open until 3 October.