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’.