MoJ moves on claims companies
Claims management companies (CMCs) will be banned from offering incentives to the public if their solicitors accept a case, under new rules to be introduced in April 2013, the claims management regulation (CMR) unit has announced today.
The CMR unit’s annual report, published today, also revealed that the unit took action against 409 CMCs for poor performance in the financial year 2011/12 and closed down 260 of them.
Among those closed down, 66 had been licensed to offer financial services including payment protection insurance (PPI) repayments.
The report said that the majority of complaints to the CMR unit in the past year had focused on 15 firms, all of whom offered PPI-related services.
The CMR will take action to ban CMCs from offering incentives, such as cash, shopping vouchers or goods, if their solicitors accept a case. The move is designed to address concerns that the incentives offered encourage people with weaker claims to sue for their own gain.
The ban will come into effect in April 2013 and be implemented through a change in the regulatory rules that firms have to abide by in order to have a licence to offer claims management services.
Head of the CMR Kevin Rousell said: ‘The mass mis-selling of PPI has seen a surge in the number of companies operating in the financial claims management sector.’
Rousell said: ‘Poor practice is rife among some firms who are falling over each other to get claimants’ business. To help tackle this we have set up a specialist team to root out the poor practices used by some CMCs presenting claims for mis-sold PPI. Our team of investigators are using effective enforcement to stop bad practice and improve the industry once and for all.'
He said there was more to do, and the industry will be subjected to radical changes over the next 12 months, with tougher policing ‘by all the relevant regulators’.
Comments
Well, who would have thought
Well, who would have thought that such things would happen-apart from anyone with even the smallest amount of common sense?
Possibly the rules against champerty and maintenance weren't quite so obsolete after all.
Surely the SRA must follow suit!!!!!
The provision of incentives to clients to make a claim is not covered under LASPO as far as I can see so I'm glad the CMR is taking action on this. I'm sure we all remember that this was one of Jack Straw's main gripes last September around the time the referral fee ban was put into LASPO.
Surely now the SRA must bring in the same set of rules to stop the "get a free IPAD" and cash up front or incentives like http://www.lawgazette.co.uk/news/firm-offers-1500-advance-pi-victims.
Lets hope our Regulator has the sense so to do.
But the SRA is entirely in
But the SRA is entirely in favour of referral fees, so why would it do anything?
In fact so much is it in favour of referral fees it has produced reasons for them not being banned.
SRA in favour of referral fees?
I have to say I don't entirely agree with your post.
The Goverment has said it wants referral fees in PI banned and the SRA will be under a lot of pressure to make sure this happens. What they have done so far is highlight the potential difficulties in achieving this, the main one bring ABSs:
"We believe that provided that all of the requirements for authorisation are met and the ABS complies with all of its regulatory obligations, we cannot seek to prevent such arrangements simply because they are set up to avoid being caught by the ban."
Other "loophole" type referral arrangements are likely to be caught and under an OFR regime it would be a very risky route to pursue. Don't forget the SRA knows who pays referral fees at present and can (and we understand will) target those firms.
Your faith in the competence
Your faith in the competence and good intent of the SRA is touching.
I stand by my original post. The SRA's statement is just a diplomatic way of trying to keep referral fees. It has always favoured them -and continues to do so. It chose not to ban them, when it could have done (and most of the profession wanted it) and it has taken Parliament to act, when a competent regulator would have done so itself.
I am aware of a multi party
I am aware of a multi party rta claim at the moment.
One party is represented separately to the others, and that is because he/she went with a firm offering £1,000 up front.
Guess which firm has told their client that they do not have a case, and that they shuld accept a pre-medical offer of £1,000? And backed it up with threats to cancel the CFA and force the client to pay legal fees if it isn't accepted? And said this despite the fact that the parties represented by the other firm have all gone for medicals?
No, it didn't surprise me either.
Sorry, that party deserves
Sorry, that party deserves everything they get! A perfect example of a client expecting something for nothing-and being brought back to reality.
I hope it happens to all such clients-only then will they begin to understand the concept of true professionalism.
We've just lost a client for an Iphone
Further to Domcoop's example, yesterday we lost a client with an RTA PI as the client has been offered a free iphone is he makes a claim with another firm of solicitors having previously instructed us!
Je despair!
but the new firm will surely
but the new firm will surely seek to preserve your lien as to cost so you will still get paid for the work you have done won't you?
Free Iphone
Maybe i'm missing something but what is the difference between the free iphone your competitors used to steal away your business and the free Ipad i was offered if i took out a particular product at PC world yesterday? this is just a way of attracting business and getting the edge over your competitor.
Particularly in an an area of law where the client doesn't pay the fees regardless of firm chosen there has to be some other incentive since merit is irrelevant in law as the client thinks we all offer the same thing.
Marks and Spencer, Nat West bank, PC World, Tesco all offer incentives on price, 2 for 1, free this when you buy that, 5p off a litre of petrol etc so why can't we offer something to attract clients?
You guys are all living in the dark ages when being a solicitor automatically meant a good standard of living and we weren't running businesses.
Now when the SRA impose minimum standards on us and such stringent regulatory measures and wit fixed fees forced upon us we are forced to run our firms as businesses and so must be free to compete as any other non legal business would in a free market and that means being able to offer incentives to attract clients.
Any decent and well trained lawyer is not motivated by personal gain over client interest but who can blame the new breed of young lawyer who has that conflict forced upon him by the state in terms of fixed fees and i refer specifically to personal injury where there is no motive for the lawyer to fight for more damages because the fee is the same regardless of the work done and result achieved and similarly legal aid fixed fees actually encourage the least work possible to maximise the now derisory fixed fees payable.
Just because something that is permitted may attract people who take advantage of clients does not mean it should be banned, there is a perfectly good criminal law, trading standards agency and in our case ombudsman to whom people can complain and seek redress and they often do. these rogue elements will be found out eventually.
Once referal fees are banned
Once referal fees are banned why would a CMC remain registered with the MOJ-they can't receive a fee for referring a PI so why pay to be regulated for no gain. These CMCs will merely go underground and do whatever they want. At least whilst registered there was the possiblility of them being subject to regulation
Referrral Fees
Will our Professional Body now go the whole way and take action to punish those Solicitors who pay estate agents Referral fees and then add this to the Conveyancing Clients bill?
Many young unsophisticated first time buyers desperate to get on the property ladder are paying for something they don't know they have a choice about. They are told by the estate agent's employee, who is generally paid a % of the referral fee, they must use the recommended solicitor if they want the property. What price the code of conduct and the client's best interests.
Sadly this group of clients don't have a political lobby like the sick miners and there are unlikley to be votes in it but it is scandalous.
With refernce to
With refernce to http://www.lawgazette.co.uk/news/firm-offers-1500-advance-pi-victims, what if a liability insurer offered this money directly to the client to prevent them going to a claimant solicitor?
About time too. Shame we have
About time too. Shame we have to wait until April 2013 though. As for the SRA, their latest software disaster shows how completely useless they are.
Bad Practice
Well , problem is much deeper than referral fee ban.The best way to rout out bad apples and safe guard the interest of good ones are to introduce compulsory qualification requirement for a license. I am sure MOJ can ask institute of paralegals or institute of legal executives to design a diploma or certificate course. It will improve industry standards as well as enhance customer confidence. Thanks
Freebies
Careful chaps. Incentives are a common form of business promotion. We live in an ABS new world. Demanding bans doesn't address the underlying problem: regulation is not effective.
The provision of incentives
The provision of incentives to clients to make a claim is not covered under LASPO as far as I can see so I'm glad the CMR is taking action on this. I'm sure we all remember that this was one of Jack Straw's main gripes last September around the time the referral fee ban was put into LASPO.
There is nothing wrong with
There is nothing wrong with incentives per se, so long as they are transparent.
But the persons giving the incentive are not selling grapes, or beans, or flavoured water. Or even a holiday or an insurance product.
ALL of the above are simply commodities (tangible or intangible) which are bought, procured, manufactured or obtained, at a certain cost, and then sold, at another certain cost to a consumer.
I know if I buy a tin of beans from my local co-op that it will cost 86p; whereas I can buy a pack of 4 with extra clubcard points for £1 from Tesco. They are the same product.
A conveyance, or a personal injury claim is NOT a commodity.
Mr Smith does not know - and has no way of knowing (given the state of education in this country) - that:-
That is the difference, is it not?
But I'm forgetting the mantra of the new era, aren't i:-
If a big company does it, and there's lots of money involved, it must be right.
Long live ABSs!
Any moderator to remove the
Any moderator to remove the groundless racial generalisations contained above?
To the poster - if you hate the law you may enjoy other websites more than the law gazette.
Post removed
The post referred to above has been removed.
Michael Cross, news editor
In a nut shell
As long as a business has information that is valuable to another business and the buyer wants to buy- and the seller wants to sell- regulations or not, there will be found a way to facilitate the transfer of this information for a fee.
Actually not sure I agree
Actually not sure I agree that is an accurate description here.
The "information" only exists because somebody has gone to the effort to obtain it, and they have done this because of the market for that information.
If there is no ready market for that information, then nobody will go to the effort to obtain it in the first place.
farce
It is completely illogical that it would appear that our regulators will be able to stop a firm of solicitors paying referral fees but if a solicitor is part of an ABS they can ??????? Fair Trading Act ?
It smells just like the way the insurance industry got around the cold calling /third capture angle by being regulated by the FSA
If anyone from the SRA reads this can they .... oh no you're more interested in sending out pointless questionnaires or focusing on getting our applications on line, was it a 6 month cock up ? I may raise this when I'm queried why I didn't respond to a client within 24hours. Did anyone get sacked for that ? I'm just waiting for "lessons will be learned" , must be great not working in the real world