Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the Advertising Standards Authority.
Claims management companies offer assistance to consumers seeking compensation for loss or damage. CMCs charge consumers a fee for doing this – sometimes only if they “win” the case and get compensation for the consumer. Below we offer guidance on the regulatory requirements of this industry, and advice on avoiding some common advertising pitfalls.
• The regulatory framework
• Make the nature of the service clear
• Avoid exaggerating the benefits of the service
• Ensure you hold evidence for success rates and average refunds/wins
• Abide by database practice rules
Since April 2007, claims management firms have been regulated by the Ministry of Justice (MOJ) under the Compensation Act 2006. The Act provides the statutory framework for the regulation of claims management activities. The MOJ has published the Marketing and Advertising Guidance Note, which provides guidance to authorised businesses on the Rules and other legal requirements.
On 1 April 2019 the Financial Conduct Authority (FCA) will take over from the MOJ and become the regulator of claims management companies (CMCs). Further information about what firms may be required to do in preparation for FCA regulation is available on their website.
Until the FCA takes over regulation, the MOJ Guidance Note applies and this requires all non-broadcast advertisements, marketing communications and other soliciting of business to comply with the CAP Code.Marketers should note that the Rules and the Guidance Note specifically state that the use of the expression “no win, no fee” must be in accordance with the CAP Help Note. In other areas the rules may go further than the CAP Code; for example, Rule 6d states that advertisers must not use the Royal Coat of Arms and the Ministry of Justice logo in any marketing. We therefore recommend CAP advice is considered in conjunction with MOJ guidance.The Rules and the Guidance Note are available on the MOJ website; the Help Note is available here.
The ASA has upheld complaints about directory advertisements for claims management companies (Compensation Claims, 31 July 2002, and Easy Claims, 10 July 2002). Because the advertisements appeared in the “solicitors” section of the directory, the ASA considered that readers were likely to infer they would be dealing with solicitors when they were not. As with will writers, marketers should not imply they are legally qualified if they are not. Consequently, marketers are urged not to advertise under the heading ‘Solicitors’ or ‘Legal Services’ but, if they have no option, they should make clear they are not solicitors or explain, if relevant, that they refer customers to an independent solicitor. In 2002, the ASA upheld a complaint about an ad that appeared in the ‘Solicitors’ section of a directory and claimed “All claims are handled by our panel of independent expert personal injury solicitors …”. The ASA believed readers could infer that the advertiser had a team of solicitors and was more than merely a referral service (Compensation Helpline, 31 July 2002).
Marketers should avoid implying consumers are more likely to achieve a better outcome by using the advertisers' services. In 2012 the ASA upheld a complaint about the claim "We are well versed in dealing with lenders and know which pitfalls to look for which make your case stronger!", ruling that it was likely to mislead consumers by suggesting that they would be more likely to have their case upheld or obtain more redress or compensation by using the advertised service (Consumer Finance Claims Ltd, 17 October 2012). In 2014 the ASA upheld a similar complaint, ruling that the advertiser had presented insufficient evidence to support implied claims that the company could offer an increased chance of a desirable outcome (Harwood Claims Management Ltd, 4 June 2014).
Marketers should avoid making claims such as "Our average PPI refund is £3,000" and "Over 90% success rate" in the absence of suitable evidence (Manchester Claims Ltd, 30 March 2016).
Records of detailed individual claims over a significant period which show that the mean pay-out per claimant is as stated are likely to be required for average returns claims. While there may be large range in the amounts paid out, they should generally be evenly spread with a significant number of claimants securing close to the mean win figure (Crystal Legal Services Ltd, 30 March 2016).
When quoting average gross compensation figures , marketers should ensure they make clear that those figures do not includes applicable fees and taxes, which will be deducted from settlements in successful cases. This information should appear in close proximity to any claims regarding average gross compensation figures. The ASA did not consider that providing information about deductions on a separate page was sufficient (Help Your Claim Ltd, 8 February 2017).
The ASA investigated the claim that a company had a “99% success rate for winning claims for Clients who have been mis-sold PPI" and noted that the company only accepted cases that they believed would succeed and because of their vetting procedures less than one per cent of the cases handled had failed. The ASA ruled that they had substantiated the claim and was therefore unlikely to mislead (Professional Personal Claims Ltd, 7 October 2015).
The ASA has received and upheld numerous complaints about SMS texts, apparently from claim management companies, that are unsolicited and/or do not offer opt out options (Cryton Ltd, 6 March 2013, Claim Management UK Ltd, 24 June 2009). Other texts have breached the Code by not making clear the identity of the advertiser (Clarity Leads Ltd, 17 April 2013). Marketers should ensure they follow the database practice rules and include all necessary information. See the database practice AOLs for more information.