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The MoJ Impose Claims Managment Fines

The Claims Management Regultor, based at the Ministry of Justice has flexed it's muscles with the first financil penatly to be imposed under the new powers.

Jeremy BarnettPosted 28 September 2015
Written by Jeremy Barnett

The Claims Management Regulator, based at the Ministry of Justice has flexed it's muscles with the first financial penalty to be imposed under the new powers. The firm, 'The Hearing Clinic' was fined £220,000 for 'bombarding millions of people with nuisance calls'. This spectacular claim was based on 'hundreds of complaints' from members of the public, complaining about speculative calls about claims for noise induced hearing loss. 

Many of those called had subscribed to the Telephone Preference Service [TPS], which is an indication that they do not wish to receive such calls.

This is an example of the 'new sheriff in town' approach to regulating successful businesses that offend consumers. The other main regulator kicking up dust at present is RECC  - The Renewable Energy Consumer Code who also have wide ranging powers to fine or close down companies who offend the code, in particular those firms selling solar panels and finance to take advantage of the Feed In Tariff [FIT]. Recent government reductions in the tariff however have brought a black cloud over the entire industry and the future of the regulator, which is funded by it's membership.

The fine that was imposed is the first of a number of pending cases, which have been brought following the change in the law in December 2014 which introduced a new power to fine claims management companies astronomical amounts.

The power is contained in the Conduct of Authorised Persons Rules which were published on 12th December 2014. Fines can now be imposed for a range of activities including;

  • Failure to comply with the rules
  • Failure to provide appropriate information to the Regulator
  • Being obstructive on an investigation
  • Failing to take out appropriate insurance

The Calculation of Financial Penalty.

This is turnover based, and limited to 20% of the turnover of companies with a turnover of £500k+. (Smaller businesses are limited to fines of up to £100k).

The first step is to asses the nature of the breach or collection of breaches. There is a scoring system with Basic breaches scoring 1, Escalated scoring 2 and  Severe scoring 3.

Then the Regulator will consider the seriousness of the breach with Low (2) Medium (4) and High (6) categories.  For example, medium level of seriousness will involve breaches that have affected consumers or other organisations. with detriment to a group of consumers or limited numbers of other organisations, with potential for further or widespread detriment if action is not taken. 

Other approaches

What the guidance does not point out is when these swinging fines should be applied. The enforcement guidance, also published in December 2014 points out that there is a range of other sanctions available to be considered including;

  • Advice where the authorised person has not acted deliberately or negligently
  • Letters of Warning 
  • Written Undertakings

If none of the above are deemed to be appropriate, then the business can be closed down on a temporary or permanent basis:

  • Variation Suspension or Cancellation of Authorisation.

Appeals

No penalty can be imposed before the target is notified and given an opportunity to respond in writing. Once the sanction has been imposed, an appeal to the First - Tier tribunal ( Claims Management Services) is provided for and then to the Court of Appeal.

Jeremy has represented a number of high profile Claims Management Companies and Solar Panel Suppliers  -see for example Re Direct Assist . He is currently advising two national firms in respect of regulatory activity described in this blog article. In one case the MoJ have provisionally assessed the fine at £850,000 and in other cases, claims in the region of £5m are anticipated.

If you are facing similar difficulties please get in touch with the Senior Clerk, Jayne Drake at St Pauls Chambers 0113 2270703

 

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