The Lord Chancellor's office will regulate the activities of claims management companies from April 2007.
Bridget Prentice, parliamentary under-secretary of state for Constitutional Affairs, re-introduced the Compesation bill to the Commons yesterday - now in its second reading -telling MPs the government was “determined to tackle practices that might stop normal activities, because people either fear litigation or have become risk-averse”.
More specifically, the government says it wants to “stop people being encouraged to bring frivolous or speculative claims for compensation”.
But Prentice also warned the Lord Chancellor's department, the Department for Constitutional Affiars (DCA), would not regulate claims chasers in the long term, stating the proposals in the Compensation bill were merely an interim solution before the regulatory structure the Legal Services bill intends to provide comes into force.
The final intention is the regulation of claims chasers will come under the umbrella of the legal services board and frontline regulators yet to be created by the government
The bill is split into two clauses in its current form:
Prentice made clear the bill would “put in place the legislative framework needed to regulate claims farmers—those people who encourage consumers to make claims—too many of whom are cowboys who have abused the system for too long, and we are going to put a stop to it”.
She also confirmed neither the Financial Services Authority nor the Office of Fair Trade wanted to take on the responsibility for regulating claims management firms.
Day-to-day responsibility for regulation is to be delegated to civil servants while a monitoring and compliance function is to be contracted-out to a trading standards unit responsible for supporting the DCA in carrying out authorisation, monitoring, complaints and enforcement activities.A non-statutory advisory committee made up of representatives of the financial services and insurance industries, the legal profession, consumer groups and the claims management sector will also be created to provide support.
From April 2007 companies will need to apply for authorisation by the DCA only if they are providing a regulated claims management service, which will include personal injury, mis-selling of financial products, employment, criminal injury compensation and housing disrepair.
But the bill also makes allowances for new areas to be brought into the regulatory net as problems arise while other areas would be removed from regulation if the problems cease to exist. It is intended that there should be a clear mechanism for dealing with consumer complaints and authorised persons will need to have indemnity insurance.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].
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