Claims management firms close as tougher laws introduced

Image caption The new rules follow consultation by the Ministry of Justice

Hundreds of claims management firms have shut following the introduction of tougher laws, the government has said.

The figures show the number of registered companies handling personal injury claims fell from 2,435 in March 2012 to 1,700 in June this year.

Such firms pursue potential claims victims with "no-win no-fee" promises, and have even signed people up on the basis of a verbal agreement.

The figures were released by the Claims Management Regulation Unit (CMRU).

The unit, part of the Ministry of Justice, is responsible for regulating companies which handle claims and pursue cases for compensation.

In April, new laws were introduced on no win, no fee deals. These included a ban on referral fees between lawyers and claims management firms.

The new rules also banned firms taking fees from customers before a written contract had been agreed and signed.

"We have taken strong action to rein in the rogue firms... and the impact is starting to show," said Justice Minister Helen Grant.

Formal warnings

"Ending these fees which fuelled a growing compensation culture has been an important step to reducing the cost of living for ordinary people - who have ultimately been footing the bill for them through their insurance premiums," she said.

The annual report also details action against firms handling claims for Payment Protection Insurance (PPI) following revelations of mis-selling by banks.

In 2012-13, the regulator cancelled the trading licences of 211 companies and issued formal warnings to another 285.

Kevin Rousell, head of the CMRU, said: "We do not tolerate bad practice and continue to take action against companies which break the rules, including removing their licence to trade."

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