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DCA to regulate claims farmers

16 June 2006

The Department for Constitutional Affairs (DCA) will assume the role of regulator for the claims management industry when the Compensation Bill receives Royal Assent later this year.

Speaking as the Bill went before Parliament for its second reading, DCA minister Bridget Prentice said: “We have considered various options on the best way in which to proceed... I can confirm that the Department for Constitutional Affairs will initially regulate the industry directly. The Secretary of State will be the regulator.”

Under the new regime, a company wishing to provide a claims management service will have to seek authorisation from the Secretary of State. All authorised companies will be required to have indemnity insurance and breaches of the “strict rules”, to which they will have to sign up, will be punishable by suspension or removal of the authorisation to provide the claims management services.

Prentice explained that, while Lord Falconer will act as the regulator, the “day-to-day responsibility for regulation” will be delegated to a civil servant, and monitoring and compliance functions will be contracted out to local authority trading standards departments. Additionally, a non-statutory advisory committee will be formed with representatives from the financial, insurance and legal sectors and consumer groups. Prentice estimated the cost of regulation to be around £1m per year.

However, she also said that the recent publication of the Legal Services Bill, which will create a new regulator, the Legal Services Board, to oversee the whole legal industry, means that any arrangements will be of a temporary nature.

“This is intended to be an interim solution. In a sense, the Bill itself is an interim solution before the draft Legal Services Bill, and the structure that it provides, come into place,” Prentice said. “It is the intention that the regulation would come under the umbrella of the legal services board and the front-line regulators that will be in place.”

This view was shared by the Claims Standards Council (CSC), once mooted as a possible regulator for the industry, which told Solicitors Journal that by the time the Legal Services Bill became law, the need for a specialist claims management regulator will have diminished.

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