Welcome to the latest Civil Justice Group update on key target areas of the reforms.

These include:

  • Discount Rate Review consultation published
  • Claims Management Regulation consultation published
  • Claims Management Regulation Unit publishes annual report
  • Civil Justice Council publishes report on contingency fees/DBAs

Discount Rate Review consultation published

The MoJ has published its long-awaited consultation on the Discount Rate Review and has indicated that there will be a second consultation to be published in the autumn. The consultation that has been published is focused on the methodology used by the Lord Chancellor in setting the discount rate for personal injuries. The second consultation will look at ways that the legal basis for setting the review might by reviewed.

The current consultation closes on 23 October 2012.

Read 'Damages Act 1996: the discount rate - how should it be set?' on the Ministry of Justice website.

Claims Management Regulation consultation published

The MoJ has published a new consultation on “Claims Management Regulation – proposals for amendments to the Conduct of Authorised Persons Rules.”

The consultation has been published due to the government’s belief that “more needs to be done to improve the conduct of claims management businesses and strengthen consumer protections”.

Amendments are being proposed in the areas of:

  1. CMC referencing of their regulatory status; 
  2. Pre-contractual information requirements; and
  3. Client updates.

The consultation also considers issues including the fees charged by CMCs on matters “relating to the personal injury market” and deals with inducements.

Download the consultation from the Ministry of Justice website.

It runs until 3 October 2012.

Claims Management Regulation (CMR) Unit publishes annual report

The MoJ CMR Unit has published its Annual Report that summarises the performance of the regulatory regime over the period April 2011 to March 2012. The report reveals that over 400 CMCs have been cancelled, suspended or warned – and that regulatory action against CMCs that failed to comply with industry standards has been stepped up over the last 12 months as the industry continues to develop.

With regard to CMC turnover, the report shows:

  • 33% increase in total turnover to £774 million last year
  • 21% increase to £445 million for those processing personal injury claims
  • 66% increase to £313 million for those processing PPI claims

Download the claims management regulation annual report (PDF, 478KB)

Jonathan Djanogly issued the following statement:

“Last year the CMR Unit were able to investigate and take action against 409 poor practicing claims management companies, of which 260 were shut down. This is a significant number and proves just how much work is going on to clamp down on companies that flout the rules and prey on consumers with overzealous business tactics. The key focus of the CMR Unit is to improve consumer protection by driving malpractice out of the claims management industry.

We also want to see tougher rules enforced on CMCs and that’s why I am pleased to announce we are now introducing a complete ban on inducement advertising for this industry. No longer will companies be able to target consumers through advertisements which offer vulnerable individuals a cash incentive for signing up to use their services.”

Head of CMR Unit Kevin Rousell said:

“The mass mis-selling of payment protection insurance (PPI) has seen a surge in the number of companies operating in the financial claims management sector. Poor practice is rife amongst some claims management companies who are falling over each other to get claimants’ business. To help tackle this we have set up a specialist team to root out the poor practices used by some companies presenting claims for mis-sold PPI. Our team of investigators are using effective enforcement to stop bad practice and improve the industry once and for all. There is more to do and the industry will be subjected to radical changes over the next 12 months with tougher policing by all the relevant regulators.

Work will continue to tackle the problems arising from unsolicited direct marketing calls and SMS text messages… The CMR Unit work closely with a number of telecom regulators, including the Information Commissioner’s Office (ICO) and the mobile marketing industry to pool resources, share intelligence and mount a more effective campaign of joined up action to try and tackle the sending of unsolicited text messages and automated calls.

The intention of regulation is not to stop CMCs trading but to try and ensure they operate their businesses responsibly, providing a fair deal for the customers they represent. Too many CMCs fail to co-operate with the CMR Unit’s investigations and put obstacles in the way of legitimate enquiries. Going forward we want to see these companies complying with the rules rather than seeking ways to evade them.”

Civil Justice Council (CJC) publishes report on contingency fees/DBAs

A Working Party of the CJC has published a report making recommendations for the expansion of contingency fees - or damages based agreements (DBAs) - to civil litigation generally. The 18 recommendations include the need for a consistent approach in the regulation of DBAs and CFAs to avoid the risk of any further “costs wars”. Given the apparent uncertainty surrounding the announcement on damages, the recommendation is timely. The report also recommends that the fee in personal injury claims should be capped at 25% of unlimited damages (excluding disbursements and ATE premium).

Download working party on damages based agreements - contingency fees (PDF, 155KB)