The government moved to clamp down on unscrupulous claims management companies last week, as the Lord Chancellor set in motion plans to take direct control over regulation of the sector by next April, with a £1 million budget.

The Department for Constitutional Affairs (DCA) launched a tender this week inviting local authority trading standards departments to apply to run a monitoring and compliance unit to enforce the regulatory regime.


Under measures announced in Parliament with the passage of the Compensation Bill last week, the Lord Chancellor will act as regulator, with day-to-day responsibility delegated to a civil servant 'with the appropriate skills and experience'.


The DCA will award a three-year contract to a trading standards unit to carry out authorisation, monitoring, complaints and enforcement - the deadline for expressions of interest is 5 July. It will also set up a committee made up of lawyers, consumer groups, the financial services and insurance industries, and the claims management sector to advise on regulation.


DCA minister Bridget Prentice said the measures are intended to be an interim solution until the Legal Services Bill comes into force, when the claims management sector will fall under the umbrella of the legal services board.


A DCA spokesman said the cost of direct regulation would be 'up to £1 million a year'. He added: 'That will include the [trading standards] contract, setting up an official to run the day-to-day side of regulation, and any other legal costs.'


Law Society President Kevin Martin said: 'The government must ensure that the trading standards department [is] given sufficient resources to enforce rigorously the regulations that are designed to protect the consumer.'


Claims Standards Council spokesman Andrew Wigmore endorsed the measures as 'practical and efficient'. But he expressed concerns that the plans to exempt unions and charities could allow claims management companies to circumvent regulation.


A spokeswoman for the Association of Personal Injury Lawyers said: 'It is essential these rules are robust enough to create a system which is transparent, open, and as rigorous as the rules governing solicitors. We have concerns that the pre-consultation draft rules will not achieve this.'


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