Broker Alert

At Debt Management Today, we have received a flood of enquiries from brokers about the emerging claims management sector.

Some are curious, many others are mistrustful and now the Ministry of Justice has released a statement specifically targeting introducers, warning them to exercise caution in dealing with these firms.

The Ministry of Justice has previously warned claims management firms about the use of misleading market statements, including phrases like: “80% of credit agreements are unenforceable” and “we have a 100% success rate.”

In the latest bulletin, the MoJ has stated that an increasing number of claims management businesses are using agents as a means of marketing their services, and that if the practice is not properly supervised, it could cause consumer detriment.

The following guidelines have been set out for these firms planning to use agents to market their services:

• There must be a legally constituted relationship of agency between the authorised business and the agent. This agreement should be in writing.

• Agents who advertise or otherwise seek out potential claimants must do so in the name of the authorised business only. Any person who advertises in their own name without authorisation would be committing an offence.

• Agents must comply with all the rules an authorised business is subject to.

• Authorised businesses will be held responsible for any rule breaches by agents purporting to be acting for them. Enforcement action will be taken against the authorised business.

However, there are some introducers that are exempt from the guidelines above, which have added to broker confusion about working with claims management companies. The Ministry of Justice has specified that in order for an introducer to be considered exempt, they must fulfil all of the criteria below:

· the referral of claims must be incidental to the introducer’s main business;

· the introducer provides no other regulated claims management service, which includes advertising the service, and advising on the merits of a potential claim

· of the cases that the introducer refers to such persons, he is paid, in money or money’s worth, for no more than 25 cases per calendar quarter; and

· where cases are referred to authorised persons the authorised persons accept responsibility for ensuring that he complies with these rules.

The Ministry of Justice has also introduced a new Claims Management Anonymous Reporting Hotline for businesses, brokers and consumers to report details of alleged malpractice, fraudulent activity and rule breaches or poor service in confidence and anonymously.

The number for this new line is 0333 200 0110. Advice or feedback is not available through this hotline but can be obtained from the main number to the Monitoring and Compliance Unit to complain or report such instances, in confidence.

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