Claims Management Companies

Debate between Andy Slaughter and Jackie Doyle-Price

Thursday 8th November 2012 Westminster Hall

[Mr Slaughter]

They could, but they clearly do not. CMCs see a lucrative industry, because there is relatively little cost to them. I am not quite sure what they hope to get out of it in the end, other than perhaps nuisance payments both to make the claim and to make the reference to the financial ombudsman. Given the sharp practice that is clearly involved in the sector, I am not sure whether the Ministry of Justice’s proposals are up to the mark in dealing with it. We have heard some good examples of companies that simply disappear overnight and reappear in another guise. I am not sure whether enforcement is dealt with sufficiently in the current proposals.

[Jackie Doyle-Price]

That goes to the crux of the matter. What we have before us is a tighter system of rules, but the problem is the behaviour of firms which are just going out of their way to profiteer. What does the hon. Gentleman think about the view expressed by some in the industry that responsibility should pass to the Financial Conduct Authority, which will be empowered to tackle firms’ behaviour?

[Mr Slaughter]

I am certainly happy to look at that. It is a constructive proposal that combats the sharp practice and cleverness of such firms on their own level, and that is not happening at the moment. I am afraid that those firms will always be one step ahead of the regulation unit. I hope the legal ombudsman will address that point. We need to look at these companies’ approach to advertisements, text messages and such things. I am somewhat at a loss as to why the Government have been reluctant to tackle this area more cogently. Again, I refer to a question that I asked in February, which is in the debate pack:

“How many claims management companies have had their authorisations revoked as a consequence of telephone or text message spamming since May 2010?”—[Official Report, 27 February 2012; Vol. 541, c. 75W.]

The answer is none, and yet we know that telephone or text message spamming is not only one of the most irritating ways of hooking clients in the first place but one of the most productive; clearly it is productive, or the companies would not use it.

The legal ombudsman makes the point that they should have a significant role to play in unsolicited contacts, whether it is cold-calling or text messaging, but it is not quite clear to me at the moment what that role will be. The legal ombudsman also raises another issue. Once a client is hooked and then effectively milked by the claims management company, how does one deal with enforcement if the company is to be brought to account but simply changes its name and directors, then disappears before appearing under a new guise? I ask the Minister to address those points and consider whether a more comprehensive legislative regime to counter abuses by claims management companies should be introduced.

My right hon. Friend the Member for Blackburn (Mr Straw) has done an extraordinary amount of work in this area and introduced a private Member’s Bill on it. When we were discussing the Legal Aid, Sentencing and Punishment of Offenders Act 2012 last year and earlier this year, both in the main Chamber and in the other place we tabled a comprehensive series of amendments to deal with the type of abuses I have been describing. I understand that the Minister was not in her current role then, but I know she took an interest in the Act. I was at a loss to see why the Government were not happy to adopt—other than that they came from us—what were very stringent restrictions on unsolicited cold-calling and SMS texting, the regulation of claims management companies and other areas to do with data selling. They were primarily restrictions on the abuse of road traffic claims, but they equally apply to the mis-selling of financial products. It does not matter whose legislation it is: again, I advise the Government to go back and look at those restrictions.

There is a myth around that there is a whole industry, including lawyers and other practitioners, that is somehow encouraging the abuses of the system, but nothing could be further from the truth. I should say that I have had representations from the Association of Personal Injury Lawyers, the Bar Council, the Law Society, as well as from major solicitors’ firms dealing with claims on this subject. I urge the Minister, having recently taken on her new role, to listen to the voices in the claimant sector belonging to some of the best informed and most knowledgeable people, who are also very angry about the abuses that take place. Perhaps she should listen to those voices more and listen a little less to the Association of British Insurers and the rest of the insurance industry, whose fingers are all over the claims management industry. Many insurance companies own or co-own claims management companies, and many indulge in practices that are just as suspect in terms of third-party capture, and which manipulate the claimant market in that way. What I hope all Members wish to see is something that protects the consumer and allows genuine and honest claims to be made.

I was grateful to receive the various briefings for today’s debate—except possibly that from the ABI. After a nod towards claims management companies, it suddenly got on to the idea of the compensation culture again. I fear that, in their legislation so far, the Government have been seduced by that argument, despite all the evidence in their own reports and reports by the Better Regulation Task Force, Lord Young of Graffham and Professor Löfstedt. All those reports found that there may be a perception of a “compensation culture” in this country, but there is no reality, and what is needed is the regulation of abuse, not of honest claims.

The Government have pushed forward very enthusiastically in LASPO with a restriction on the ability of claimants with meritorious claims to bring their cases before the courts, across the whole area of civil litigation.