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.
Comments
Ban on verbal contracts
This has to be a good thing. Assuming people who have just been involved in an RTA - by definition a "distress purchase" are able to work out what is going on when they are being bombarded with offers of assistance from all comers, is just wrong. There has to be a level playing field for all.
Verbal contracts to be banned
Verbal contracts are NOT to be banned. It is ORAL contracts which are to be banned.
Why you no learn writings da Eeengleesh?
Oral v verbal
Quite right - it has been changed. (Though alas the Gazette's copy of the Oxford Dictionary of English lists 'spoken rather than written' as a meaning for verbal.)
Michael Cross, news editor
Agree with the Oral Contracts
Agree with the Oral Contracts issue, although in practice it is obviously unenforcable and meaningless. Either a person is going to go with a CMC who orally tell them they have got compensation for them, and that CMC will sell the claim to a solicitor; or they will not. I can't see how the MOJ would even know about whether there was an Oral contract, let alone get involved.
On the other hand, I don't agree with the PPI thing. If you agree to pay £200 to a CMC to claim £2,000 (let's say), and the CMC get the £2,000 then they have done their job. If the bank then apply that to a loan or overdraft then the client of the CMC have still saved themselves £2,000 that they would otherwise have been liable to pay.
If all the banks (who have all the records) simply recredited each of their customers with their PPI, then there would be no need for this. But the banks don't, so there is a role for CMCs (and solicitors) help clients get their money back.
Well said!
Well said!
Surely the CMC would have had
Surely the CMC would have had to give cancellation notice to comply with the Cancellation of Contracts Made in a Consumers Home or Workplace etc Ragulations ? Absent such cancellation notice, I thought the contract was unenforceable. That being the case, they couldn't pursue their client for the money owed any way. So I don't see what the issue is here and how the proposals will better protect consumers over and above the protection they are currently afforded. The issue of set off should have been discussed with the client prior to them embraking on the claim. If the CMC failed to advise on this, the client might have a potential negligence claim. I don't see how you can prevent banks etc from setting off. As DomCoop says, if the CMC has got the client their money back as they offered to do, they have upheld their side of the agreement and should be paid.
clampdown? - ban them altogether
Can somebody please assist me - exactly what value do CMC's add to the legal process? In the old days - consumers found Solicitors through recommendation, yellow pages, press, internet etc - agree fees - move on. Now, CMC's with enormous marketing and pay per click spends flood the internet, many using names that could be easily confused by the general public as being Solicitors themselves when they are clearly not - mop up the vast majority of clients looking for legal services on the ever increasing web marketplace and then sell them to the Solicitors, many of whom feel compelled to buy them to survive because it is not a level playing field and they simply cannot compete with them. Have I missed something or have we been sold down the river yet again?
CMC role in claims marketing
Very few CMC's actually provide added value to the claims process, but the time to be rid of them has long passed by for a profession that is riddled with profiteers who have funded CMC's through ever growing referral fees over the past 25 years, even supporting companies like Claims Direct, Accident Group and myriad others who were blatantly breaking the law and cheating the public to generate thousands per claim in revenues and thus overpower any legitimate CMC's in those early years.
The pooling of marketing funds could have been done by individual firms from the late 1980's but even the Law Societies Accident Line failed as firms realized they could continue to receive claims without contributing to the marketing instead of just playing fair.
The profession has failed itself and CMC owners have profited from their independence of the profession itself, but the opportunity remains open for lawyers to control this market if enough firms could "play straight" together but in a quarter century in claims marketing I have yet to have any confidence that could occur.
You are right to resent the abuse by CMC's but as the ultimate controllers of the game are lawyers and insurance companies it is a sad case that neith of these industries can be honest enough to make a system work for the benefit of claimants and the insurance buying public.
Anonomous Regulation is No Regulation
Does anyone else think that not identifying who you are regulated by is the same as not being regulated at all? I can see the pros and cons of CMCs but what winds me up is that they, like most non-lawyer enterprises have rules which are far more relaxed allowing them to structure themselves how they like making them far more nimble than the legal profession. To my knowlegde, no one has suggested that stating 'Authorised and Regulated by the Solicitors Regulation Authority' implies that the SRA thinks you're great at what you do and even if they did think that the SRA would no doubt politely set them straight. Can't see its a good idea not to state the name of the actual regulator. To do otherwise is going to leave the vast majority of the disaffected customers lost as to who they can make a complaint to. Afterall if they could get this type of information on their own they wouldn't have gone to a CMC in the first place! Having just said that, I can now foresee a new breed of CMC which looks for claims against CMCs...