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MoJ Regulation

The Compensation Act of 2006 brought regulation to the Claims Management market making it illegal to operate a company without first seeking authorisation from the Ministry of Justice.

Registration itself is relatively straightforward but there are lots of rules which the company must adhere to once authorisation has been granted and together with an application fee there is an annual fee based upon the turnover of the business.

Notwithstanding the Compensation Act that came into force on the 23rd April 2007, firms are currently being allowed to trade even if they have not received authorisation as long as they have a valid application currently being dealt with. The Ministry of Justice will not set a deadline when it will be illegal to trade without authorisation but continues to process the applications.

For further information and to see a list of authorised businesses please see the Ministry of Justice website at www.claimsregulation.gov.uk

The Solicitors Regulation Authority (SRA)(replacing the Law Society in regulating solicitors) has drawn up a new code of conduct for solicitors which includes a very specific element in relation to how solicitors should conduct the business of soliciting work from claims management companies. This took effect from the 1st July 2007. In some ways the regulation provided by the Ministry of Justice is insufficient to ensure that you also comply with the code of conduct from the SRA. In particular we are aware of the SRA examining each and every trading/marketing agreement between their members and claims management companies.

Each solicitor is duty bound to ensure that each claims management company abides by the code of conduct or it should not take work from them. This includes a duty to ensure that their independence and ability to provide the best advice to their clients is not undermined by marketing agreements for example, which include use of certain insurance products.

Some analysts believe that this will have a greater effect on claims management companies that the actual regulation from the Ministry of Justice. One example of this is that cold calling in person is not allowed under the Compensation Act but cold calling by telephone is allowed. However, solicitors are not allowed to cold call by telephone!

The Ministry of Justice continues to monitor claims management companies and their tactics can include mystery shopping where they will pretend to be a prospective client to see what is offered and how they are passed through to a solicitor. They continue to monitor websites and any advertising scarried out by claims management companies.


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