Claims management companies

Claims management companies often advertise on TV, local radio, in Yellow Pages outside supermarkets or local markets, offering to take on compensation claims. What they offer varies, but it usually includes one or more of the following:

arranging after-the-event insurance (for which they get paid a commission, taken from what you pay for the insurance)
referring people with a claim to a solicitor (for which the solicitor pays them an 'introduction' or 'referral' fee)
handling a claim themselves (for which they get paid out of your compensation); or
investigating or arranging for a claim to be investigated, for example, taking statements from you and any witnesses or taking photographs and assessing your chances of success

These companies have been criticised by Citizens Advice for some of their sales practices and the quality of advice they give. But, from April 2007, a new law protects the public. Now, many more businesses providing advice or other services (like the ones listed above) to someone with a possible compensation claim have to be authorised to do so. This applies to claims for:

personal injury
criminal injury
industrial injury disablement benefit
employment matters
housing disrepair
financial products and services

If they are authorised, their services must meet certain standards. If they provide these services without being authorised, they will be committing a criminal offence. It is also a criminal offence for businesses to pretend to be authorised to provide these services when they are not. You can check if a business is authorised by carrying out a search on the claims regulation website. See the link on the right.

Authorisation and regulation is carried out by the Department for Constitutional Affairs (DCA).

Some organisations, such as firms of solicitors, charities and most trades unions, don’t have to be authorised.

market stall

Maria's story:

'I was putting the rubbish out for collection the next day when I stumbled and fell outside my front door. My neighbour helped me get up. I wasn't hurt just a bit shocked. Nothing that a cup of tea didn't sort out.

Some days later, a man knocked on my door asking if I'd had any accidents recently. I told him about my fall and he tried to persuade me to make a claim. All in all he came round to my house four times. My English isn't very good but I kept trying to tell him that although I did fall over I wasn't hurt. He just went on and on about claiming compensation and promised that the arrangement he was offering me was 'no win, no fee'.

In the end I signed the papers he gave me. I felt harassed by him and just wanted him to stop coming round. I was really shocked when I later got a solicitor's bill for £670.'

Maria didn't ask the man from the claims management company to call round. Turning up at the front door without an invitation from Maria is now banned. Maria can complain to the DCA's Claims Management Regulation Monitoring and Compliance Unit. If she does, the company risks being penalised. For details about how to contact the Unit please see the Useful contacts section.

There are some things you need to think about before you allow a claims management company to handle your claim:

The company's staff may have no formal legal training or qualification, which would mean they can't start legal action on your behalf and take your case through the courts - they can only negotiate with the organisation you are claiming from. This may weaken your position, because your opponent will know they can take your case only so far. It could also delay your case if you get to the point where legal proceedings need to be started and your case has to be transferred to a solicitor.
The company may charge you a lot of money for their services. They sometimes charge a 'contingency fee' which means they will take a proportion of the compensation you win.
You have 14 days after you sign a contract with an authorised claims management company in which to cancel it. This is known as a 'cooling off' period. The idea is to give you some time to think about whether you really want to go ahead. If you cancel, you may be charged a cancellation fee but the fee must be reasonable.

You should be wary of dealing with anyone who:

uninvited, calls at your door, phones you or comes up to you in the street or visits you in hospital trying to persuade you to make a claim. This is called 'cold calling in person' and is banned under the new rules
tries pestering you into making a claim
offers you a cash advance on your compensation or something else to persuade you to make a claim
asks you to sign a contract or, for example, a loan agreement for after-the-event insurance, on your doorstep or in your home without giving you time to get advice on the content. Ask to look at it for a while before you sign. Show it to your local law centre, Citizens Advice Bureau or other advice agency and ask them to explain exactly what it's for and what costs it will and won't cover.
seems reluctant for you to delay signing a contract so you can get legal advice on the contents.

law centre

You can complain about anyone who does any of these things by contacting the DCA's Claims Management Regulation Monitoring and Compliance Unit on 0845 450 6858.