New watchdog needs to bark

Whether you see them as parasites or partners, claims management companies are an established presence in the legal system. Law firms which could not hope to spearhead their own marketing campaigns rely on the claims harvesting activities of these businesses. The compliant ones can be tolerated, but the actions of the dishonourable few leave an indelible stain on the sector.

Few will quibble with the Financial Conduct Authority’s ostensibly tough new approach to regulation (see p16). The organisation takes over responsibility next April from the Claims Management Regulator of the Ministry of Justice, a body which seemed at times to have the spine of a centipede.

The noises coming from the FCA are encouraging: more information upfront for clients on how fees are being accrued and what the likely outcome will be; extra due diligence on the origin of claims; and a requirement to signpost clients to alternative forms of redress.

The previous regime suffered from the likelihood of rogue bosses creating phoenix companies and starting afresh. Now applicants for licences will have to prove separation from any directors who have been sanctioned in the past.

The government’s curious decision not to pursue a total ban on CMCs from cold-calling will constrain the new regulator, but at least the FCA appears to be saying the right things.

You may not like the power and influence of claims management companies, but they are not going anywhere soon. Indeed, the Civil Liability Bill, which ultimately takes solicitors out of the equation for many low-level RTA claims, means their presence is only likely to grow.

Importantly, personal injury firms (which can be both allies and competitors of CMCs) can reasonably assume that they now operate on a level playing field. They must jump through hoops to satisfy the SRA and now the claims farmers face similar obstacles. The claims sector, in theory, is better for this change, so long as the City watchdog proves willing to bear its teeth.