Posted 08 August 2016 by Donna Scully
The Government have now handed over responsibility for the regulation of claims management companies (CMCs) to the Financial Conduct Authority (FCA). How will this impact CMCs – is the number likely to reduce further?
I was reminded recently that the term ‘lawyer’ has no statutory or regulatory meaning in the UK. Unlike the unauthorised use of ‘solicitor’ or ‘barrister’ which is a criminal offence under the Legal Services Act 2007, the term ‘lawyer’ can be used by anyone claiming to offer “legal services”.
Regrettably, I suspect that we will see a proliferation of such fake ‘lawyers’ in the coming years. Although lacking legal qualifications, oversight and legal insurance, this new breed of ‘lawyers’, whether
attached to a Claims Management Company or a morphed version of a McKenzie Friend, will be positioning themselves as the new champions of accident victims, seeking to steal our beloved principle
of access to justice for their own purposes, i.e. monetary reward.
We can already see this happening. The turnover of CMC income derived from personal injury increased from £238m in 2013-14 to £310m in 2014-15. The number of PI CMCs may continue to fall when the 2015-16 figures are published next month, but I anticipate that we’ll see a further increase in PI turnover, which is the important figure.
The transfer of the CMC Regulator to the Financial Conduct Authority (FCA) is still some way off, requiring primary legislation, yet to be published, and we certainly don’t know what impact this may have on toughening up the regulatory regime. I hope that the delayed re-organisation does not impact the implementation of Carol Brady’s review into the regulation of CMCs. I would have liked her review to have gone significantly further, but I hope that within its new home, the CMC Regulator will have sufficient funding and resources to deliver the rigorous and robust regulatory oversight that is so desperately needed.
The tougher regulation of CMCs is not going to solve all the problems of fraud or reform the claims system to the benefit of genuine accident victims, but it is a start. The Government’s proposed measures to tackle fraud and whiplash claims will only exacerbate the problem of the proliferation of ‘legal services’ providers, whether they be CMCs or something else, leading to US-style contingency fees and a range of unintended consequences.
I see that the Legal Services Board has once again made the baffling decision that consumers would be “harmed” if there was a ban on paid McKenzie friends, but it is OK if they change their name. McKenzie Lawyers anyone?
Donna Scully, Carpenters