Clampdown on rip-off claims firms starts to bite

Rogue claims management companies are running scared after more than 350 of them were shut down, suspended or warned by the Ministry of Justice (MoJ) in six months, it is revealed today.

The rip-off firms tempt unsuspecting consumers with the promise of payouts for personal injury, mis-sold payment protection insurance or unfair bank charges. But many targeted by the firms have no chance of a payout.

Instead, people become victims as the rogue companies sting them for upfront fees. The MoJ's Claims Management Regulation Unit closed 209 firms between April and November this year. Meanwhile, three were suspended and 140 more were warned.

Companies shut down included personal injury firms such as Accident First Xchange in Greater Manchester, financial services businesses such as First Refunds in West Sussex, and housing repair organisations such as People's Legal Bureau in Hampshire.

Next year, rogue firms will face an even tougher environment as consumers will be given greater protection against them. Businesses will be forced to agree written contracts with customers before taking fees and while a new independent consumer complaints service is being set up to compensate those who have got a raw deal.

The unit is also working with data watchdog the Information Commissioner to tackle firms who break the law with unsolicited calls and texts.

Justice minister Helen Grant said: "We will not tolerate claims management companies that rip off consumers and flout the rules." More than 900 claims management companies have been shut down in the past five years, the MoJ said.

From 2013, the Legal Ombudsman will provide an independent complaints scheme for dissatisfied claims management customers.