Claims management companies (CMCs) could be forced to pay back millions to consumers under new plans announced yesterday by the Ministry of Justice.
It has handed over responsibility for handling CMC complaints to the Legal Ombudsman. The change will mean CMCs could be forced to pay up to £30,000 in compensation to disadvantaged consumers.
At present CMC customers must lodge complaints with the Ministry of Justice, which regulates the industry but does not have the power to arrange compensation. The new rules will give consumers the chance to claim redress against rogue CMC firms for the first time.
The MoJ will continue to regulate the industry through its Claims Management Regulations Unit. Its chief, Kevin Rousell, said: "We will continue to target those CMCs who do not comply and we will work in partnership with the Legal Ombudsman to root out those CMCs that take advantage of consumers."
The MoJ has been cracking down on CMCs following a rising tide of unwanted texts and cold-calling from firms aiming to profit from the £10bn bank mis-selling scandal relating to PPI.