Corporate report

Claims Management Regulator: enforcement actions April to June 2018

Updated 6 December 2018

This was published under the 2016 to 2019 May Conservative government

1. Live investigations and recent actions

The Claims Management Regulator (CMR) publishes quarterly updated information on recent enforcement actions and investigations.

2. Actions: April to June 2018

The Regulator uses its powers to take action against authorised claims management companies (CMCs) and individuals who don’t meet the required standards

Between April and June 2018 the Regulator took the following action:

Activity	April to June 2018
Investigations started into authorised CMCs	1
Investigations started into unauthorised CMCs	0
Licences cancelled	13
Financial penalties issued	0
Warnings issued	39
Audits conducted	81
Visits conducted	112

3. PPI and other financial claims

Mis-sold Payment Protection Insurance (PPI) continues to be the most active claims area in the financial claims sector with around £400m paid out each month in redress. In addition, CMCs in this market are also representing clients to bring complaints about Packaged Bank Accounts, Short Term/Payday Loans, Investments, Pensions and Mortgages.

On 1 April 2018, new rules were introduced which prohibit CMCs charging a fee prior to the successful conclusion of a PPI complaint. Additionally, where a complaint has been made where the client did not have PPI or wasn’t a customer of the lender, then they cannot charge a fee. A rule was also introduced requiring CMCs that charge cancellation fees to itemise the invoice detailing the work it has undertaken prior to the client paying any fees.

The CMR continues to prioritise and tackle malpractice in the financial claims sector on a risk assessed basis. This primarily continues to be led by conducting compliance audits of CMCs and carrying out investigations where serious breaches are identified. When conducting audits, officers will examine various aspects of a CMC operation including client acquisition and sales, client paperwork, claim processing, complaints handling and other processes and systems.

The CMR is actively monitoring fees charged by PPI CMCs following the introduction of the interim fee cap in the Financial Guidance and Claims Act 2018 limiting the fees CMCs can charge consumers for PPI complaints to 20% plus VAT from 10 July 2018.

The CMR took the following action during this quarter:

• Audited 25 CMCs
• Continued and progressed investigations into 11 CMCs
• Issued 6 warnings to CMCs

4. Personal injury, holiday sickness and housing disrepair

The CMR closely monitors CMCs operating in the personal injury market through a programme of audits and visits. Audits continue to be arranged to assess compliance with the referral fee ban, rules on marketing and how CMCs engage with clients. Our Personal Injury (PI) work has been extended to include supervision and enforcement of CMCs providing holiday sickness and housing disrepair claims services. Many CMCs providing these services emerged from the mainstream PI market and operate in a similar manner.

The CMR has continued to meet with stakeholders who provide social housing and are receiving housing disrepair claims to understand the activity and misconduct in this area.

This quarter the CMR took the following action:

• Audited 43 PI CMCs and issued advice to those that were non-compliant with the referral fee ban, Conduct of Authorised Persons Rules and Regulations
• Issued 8 warnings
• Visited 11 CMCs
• Continued investigations into 2 CMCs
• Continued monitoring the holiday sickness market, conducting audits of 4 CMCs active in the sector
• Audited 10 CMCs operating in the housing disrepair claims sector

The regulators risk based approach,has led to the identification of CMCs involved in suspected fraudulent and other criminal activity. The CMR has continued to collect intelligence on CMCs from a wide range of different sources and works closely with law enforcement agencies in order to disrupt this activity and support live operations. This quarter, this work has included:

• Attending meetings and acting upon referrals from enforcement partners in the North West in respect of ongoing criminal investigations
• Attending Insurance Fraud Bureau (IFB) hosted Fraud Forums and working closely with the IFB and partners from the insurance industry to share actionable intelligence about businesses in the Midlands
• Working with Local Authorities with a view to supporting action against practices which harm consumers

5. Nuisance calls and texts

Nuisance calls and texts remain a concern to the UK public and it is still a key compliance priority for the CMR. The CMR scrutinises CMCs handling of data and leads for direct marketing and participates in multi-agency initiatives to tackle those responsible for making nuisance calls and texts or looking to benefit from leads generated using these practices. This includes working closely with the Information Commissioner’s Office (ICO) and other regulators to identify and take action against those companies that engage in non-compliant marketing.

The CMR took the following action this quarter:

• Audited 24 CMCs engaged in direct marketing
• Issued warnings to 2 CMCs
• Progressed formal investigations into 15 CMCs engaged in suspected non-compliant direct marketing practices

6. Unauthorised trading

The CMR remains focussed on tackling unauthorised activity in the claims management sector. The CMR is working with partner agencies to improve intelligence gathering and detection, and take proportionate and effective action.

During the last quarter the CMR received over 127 reports of businesses conducting claims management activity without authorisation. All reports are reviewed and risk assessed with strategies developed in order for effective investigatory or disruptive action to be taken. Following this review process and engagement with several of those the CMR believed to be involved in unregulated activity, 12 warnings were issued to businesses during the last quarter requiring them to immediately cease claims management activity or be subject to further enforcement action.

As well as reviewing reports of businesses that have never been authorised to provide regulated claims management services, the CMR is also proactively monitoring businesses that were authorised but had surrendered their authorisation or had their authorisation cancelled. Much of this work involves unannounced site visits to the premises of the formerly authorised business and 80 of these visits have been carried out over the last quarter.

Often, the activity of unauthorised businesses is less visible, in particular those handling claims data and offering this to authorised CMCs. The CMR has been conducting several inquiries of this nature into businesses suspected to be selling details of potential personal injury clients to authorised CMCs. During the last quarter, 13 businesses were identified and contacted that were believed to be engaged in this activity.

7. Other news and publications

The CMR Unit published its 2017/18 Annual Report on 5th July.