Corporate report

CMR enforcement actions: April to June 2014

Updated 28 May 2015

1. Live investigations and recent actions

Part of the role of the Claims Management Regulator (CMR) is to ensure that authorised claims management companies (CMCs) have understood and are operating in line with the rules they’ve agreed to follow.

We publish regularly updated information on recent enforcement actions and investigations.

2. Actions: April to June 2014

The regulator uses its powers to take action against authorised CMCs and individuals who don’t meet the required standards.

In the first quarter of the financial year (April to June 2014), these actions included:

• 29 visits to CMCs
• 124 audits carried out
• 25 investigations started
• 136 warnings issued
• 2 licences cancelled
• 1 application for authorisation refused

3. Latest activities

CMR is taking action to deal with consumer and business concerns in a range of areas.

3.1 PPI and other financial claims handling

The practices of some CMCs specialising in financial claims, particularly mis-sold payment protection insurance (PPI), continue to concern consumers and the financial services industry.

The regulator took measures to increase compliance in this sector and to strengthen enforcement action:

Actions	Outcome
Warnings	Warned several CMCs for failings which included accepting claims from unauthorised businesses, making mis-sold claims without thoroughly substantiating them and using generic letters of claim (particularly in relation to packaged bank account claims).
Formal enforcement action	Cancelled the authorisation of Morganbentley Ltd in June 2014 and began investigations into several CMCs for suspected rule breaches in relation to website marketing and processing financial claims. A number of investigations are ongoing.
Audits	Audited 45 CMCs which included a number of re-audits to check if they had followed the advice we had given during previous audits. CMCs are assessed and selected for audits based on the intelligence we receive and the risk they pose.
Dealing with brand/trademark abuse	Closely monitored and considered the marketing of those CMCs using the name and branding/trademarks of financial businesses (mainly banks) in their marketing. We highlighted these issues in our March business bulletin. Where misleading marketing breaches are identified, we will take enforcement action, as appropriate.
Conduct rules consultation	Published our response to the consultation on the proposed changes to the Conduct of Authorised Persons Rules. The new rules will come into effect on 1 October 2014. In preparation for their implementation we have drafted guidance on how the rules should be followed and examples of best practice, which will be published in September. As part of this process, we have held informal consultations with relevant stakeholders from the financial services industry, such as the Financial Ombudsman Service and representative bodies.

3.2 Nuisance calls and texts

The amount of unwanted marketing calls and spam text messages continues to be a serious concern for CMR and other regulators with primary responsibility in this area - Information Commissioner’s Office (ICO) and Ofcom.

CMR is working closely with these organisations to identify and take action against those companies that break the rules, especially those that collect and sell personal data.

During the first quarter of the financial year (April to June 2014) CMR took the following actions:

• audited 26 CMCs engaged in direct marketing, including 2 joint audits with the ICO
• continued investigations into 2 CMCs in relation to non-compliant direct marketing
• warned 1 CMC engaged in lead generation
• increased the number of website checks, including social media sites, with a view to identifying and putting a stop to any misleading marketing
• issued a specialist marketing bulletin to CMCs in May 2014, providing guidance and advice to help make sure their direct marketing activities are compliant
• began working more closely with the Advertising Standards Authority regarding a number of complaints about CMCs’ advertising
• identified 9 direct marketing businesses potentially engaged in providing regulated claims management services without authorisation
• continued an investigation into an unauthorised business believed to be involved in lead generation

3.3 Personal injury: referral fee ban

A complete ban on CMCs, solicitors and insurers paying or receiving referral fees in personal injury cases has been in place since 1 April 2013. Industry regulators have been closely monitoring related activity.

CMR is checking how CMCs are adapting to the ban through a proactive programme of compliance activities. In the first quarter of the financial year (April to June 2014), the regulator took the following actions:

• audited 73 CMCs
• inspected 104 CMCs’ business models
• issued 10 warnings
• brought 53 CMCs to compliance
• continued to work closely with partners such as the Solicitors Regulation Authority (SRA) and the Financial Conduct Authority, sharing information and raising issues as they emerge

Since the referral fee ban came into effect, the regulator has visited over 900 CMCs and audited over 250 to ensure they are following the rules. At the start of 2013, around 2,300 CMCs were operating in the personal injury market. This fell to just under 1,170 CMCs at the end of June 2014.

3.4 Insurance fraud

The regulator works with the Insurance Fraud Bureau (IFB) and the City of London Police’s Insurance Fraud Enforcement Department (IFED) to disrupt criminal operations. During the first quarter of the financial year (April to June 2014), CMR focused on CMCs processing stolen personal data from insurance claims.

CMR has agreements with over 20 police forces around the country, providing statements and evidence to them.

In the second quarter of 2014, the regulator took the following action:

• Assisted West Yorkshire Police with an ongoing operation
• Began investigations into 3 CMCs
• Provided evidence regarding the prosecution of a police officer involved in data theft
• Continued investigations into 10 CMCs believed to be coaching consumers into making fraudulent claims
• Continued to work with a range of enforcement agencies, including the IFB, IFED, ICO, and SRA to deal with data theft