Regulation of Claims Management Companies by the MoJ

Who is the Claims Management Regulator, and What is Their Role?

The Claims Management Regulator came into being through the Conduct of Authorised Persons Rules 2014, which was published on December 12th of that year. The role of the claims management regulator is the regulation of claims management companies- companies which offer their management services to people claiming compensation for a range of issues and injuries.

The claims management regulator offers guidance for both companies and consumers, and heavily enforces the Conduct of Authorised Persons Rules, with the power to suspend, vary and cancel the authorisation of businesses who disobey these rules. With the 2014 Rules’ introduction, it became possible for claims management companies to be fined for a range of activities, including;

  • Failure to comply with the Conduct of Authorised Persons Rules.
  • Failure to provide appropriate information to the Regulator.
  • Causing obstruction to an investigation.
  • Failing to take out appropriate insurance.

Ultimately, the role of the claims management regulator is therefore to ‘promote interests of consumers and the public’ by ensuring firms ‘understand and comply with the conditions of their authorisation’. Through this, it is hoped that the claims management regulator can protect the public from companies who are annoying at best, and targeting vulnerable individuals at worst.

Immediate Actions Taken by the Claims Management Regulator

The new powers of the claims management regulator, based at the Ministry of Justice served its first financial penalty regarding the regulation of claims management companies in 2015. The firm who received this penalty, ‘The Hearing Clinic’, were 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 claims for noise induced hearing loss.

Many of those called had subscribed to the Telephone Preference Service (TPS); an indication that they did not wish to receive such calls.

The Hearing Clinic case is a key example of the ‘new sheriff in town’ approach to regulating successful businesses who upset consumers. The other main regulator kicking up dust around this time was RECC (the Renewable Energy Consumer Code), who also possessed wide ranging power to fine or close down companies offending the code, in particular firms selling solar panels and finance to take advantage of the Feed In Tariff (FIT) (government reductions in the tariff around the 2015 mark however brought a black cloud over this entire industry and the regulator’s future, which is funded by its membership).

The fine imposed against The Hearing Clinic was the first in a long line of cases, all spurred from the law change in December 2014, which introduced the claims management regulator as a new power in the regulation of claims management companies, with the ability to fine such companies astronomical amounts. Showcasing a new, much tougher approach to regulating claims management companies, the claims management regulator issued 296 warnings in their first year, removing 105 licences.

The claims management regulator has kept these figures high into 2018, with their Annual Report 2017/2018 evidencing £279,050 fines issued, 45 licences cancelled, and 252 warnings given. However, this report does also state that, in general, misconduct in this sector has ‘significantly reduced’ since 2014.

See the claims management regulator’s official site for a full list of their investigations and actions taken.

The Calculation of Claims Management Fines

According to 2014 rules the calculation of financial penalty was turnover based. For companies with a turnover of £500k+, this was limited to 20% of the total turnover. Smaller businesses were limited to fines of up to £100k.

The first step in calculating financial penalty is to determine the nature of the breach or collection of breaches. A scoring system exists with ‘basic’ breaches scoring 1, ‘escalated’ breaches scoring 2, and ‘severe’ breaches scoring 3. The regulator then evaluates the seriousness of the breach from ‘low’ (2) to ‘medium’ (4) and finally ‘high’ (6). To give you an idea of how severity is considered, a 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. A medium level will therefore hold potential for further or widespread detriment if action is not taken. A high level of severity however would involve breaches which have already caused further/widespread detriment, and so forth.

Other Approaches

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

Appealing Claims Management Fines

According to the 2014 legislation, no penalty can be imposed prior to the target being 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.

2018 Changes to the Regulation of Claims Management Companies

Changes to claims management regulation, and the power and duties the claims management regulator holds, were made in 2018 via amendments to the Conduct of Authorised Person Rules. These updated rules came into power on April 1st 2018, and must be followed today if your company provides regulated claims management services, without exception.

To see the full changes made within the 2018 amendments, please see the 2018 Rules’ guidance. You can also check the claims management regulator’s latest updates.

If you are facing difficulties regarding claims management fines, please contact the team at St. Pauls Chambers today, and get in touch with our Senior Clerk, Jayne Drake for further assistance.

Featured insights

What happens if you drive without a licence?
What are the penalties for Benefit Fraud?
Stages of Money Laundering explained

Contact Us

Chambers is centrally located within walking distance of the train station, secure car parks and the Courts.

Contact Us

St Pauls Chambers
Park Row House
19-20 Park Row

For out of hours assistance please call the senior clerk on 07854170429.

The switchboard will open from 08:30 until 17:30

Phone: +44 (0)1132 455 866
Email: [email protected]
CJSM: [email protected]

Portfolio Builder

Select the expertise that you would like to download or add to the portfolio

Download    Add to portfolio   
Title Type CV Email

Remove All


Click here to share this shortlist.
(It will expire after 30 days.)