First 4 Lawyers fears 'unintended consequences' of CMC regulation

In its response to the MoJ consultation, the legal firm also recommended banning the practice of businesses selling on data where clients have given permission to be contacted by third parties, when the purpose is to seek potential claims.

Meanwhile, First 4 Lawyers has called on the insurance industry to "put its own house in order" and take a zero-tolerance approach to challenging all dubious claims in court, "rather than seeking to get rid of them as quickly and cheaply as possible".

Qamar Anwar, managing director of First 4 Lawyers, said: "We believe that there are effectively two CMC markets - financial products and everything else. To be clear, First 4 Lawyers has no involvement or interest in the financial market, but we are concerned that there could be unintended consequences as a result of extra regulation aimed primarily at the activities of financial CMCs.

"We are also concerned that there is a lot of generalisation and perception around the CMC market, but not so much data. We hope that this review will identify robust evidence sources and then share them with stakeholders for comment before reaching any conclusions."

The firm's response points out that such evidence as has been published by the Claims Management Regulator and the Legal Ombudsman indicates that financial CMCs are the overwhelming cause of consumer complaints and dissatisfaction.

A report this month from the Legal Ombudsman said that 94% of consumer complaints since it took on the jurisdiction six months ago relate to financial CMCs.

First 4 Lawyers' consultation response stated: "On the basis of proportionate and targeted regulation, new measures should be for the financial CMC sector alone."

The firm has claimed that since it was first regulated in 2008, First 4 Lawyers has been the subject of just two complaints to its regulator, both of which were rejected.

On the sale of data, the response said: "Insurance brokers, comparison websites and direct insurers - who all process data for the purpose of providing quotations - commonly sell on that information to data-mining businesses, who will contact those consumers who have stated they have had a non-fault accident in the past three years.

"Although it is a CMC that undertakes the outbound calling activity to try and convert a claim, we would propose that regulation is introduced to ban the sale of data at source if the practice is to cease."

The response continued: "The proposed need for greater regulation is aimed solely at CMCs. However, it is common practice for solicitors and/or accident management companies - that are either in an alternative business structure arrangement or have other strategic links with insurance companies/brokers/managing general agencies - to contact clients and/or third parties to try and pursue claims on their behalf. Those claims can include personal injury, alongside other non-regulated matters, such as credit hire and repair services.

"Everyone in the market needs to take responsibility and there must be a level playing field. Other regulators, such as the Financial Conduct Authority and Solicitors Regulation Authority, must be encouraged to audit their regulated communities to ensure that they are complying with the raft of regulation that already exists."

The deadline for submissions to the review is tomorrow (13 November).