Claims management companies (CMCs) may have to pay compensation to customers they have mistreated under government proposals to bring them within the remit of the Legal Ombudsman.
The Ministry Of Justice (MoJ) will today announce it is handing over the responsibility of regulating CMCs to the Legal Ombudsman from next year, the Financial Times reports.
At present, the MoJ regulates CMCs but cannot order them to compensate customers.
However, the Legal Ombudsman would be able to order payouts of up to £30,000 to consumers who had been cheated by CMCs, and officials are considering increasing the maximum compensation limit to £50,000.
Chief legal ombudsman Adam Sampson said: "This is great news for the public and consumers as we have significant powers of redress to help protect them.
"We are confident we can support the claims management regulator to improve standards across the industry."
The latest measures come on top of a package of reforms announced earlier this month by the MoJ, which includes banning CMCs from taking fees from customers without a written contract.
CMCs have drawn the ire of a number of advisers recently over what they perceive to be unfair claims.
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