The Compensation Act 2006
The rapid increase in the number of 'no win no fee' claims companies in the UK has had both positive and negative effects. In the first instance, it has been suggested that these companies have increased public access to the justice system by mitigating the initial financial costs associated with making a compensation claim. On the other hand, however, the conduct of many so-called 'claims management' companies has come under scrutiny; many of these organisations have been criticised for their high-pressure sales tactics and the unexpectedly high costs that can eat into any final compensation award.
Claims Management Regulation
In order to combat the problem of 'rogue' claims management firms, Parliament passed the Compensation Act in 2006. While this Act serves several purposes, its main functions are to regulate the claims management industry and thereby reduce the false impression amongst the public and the corporate world that a 'compensation culture' is flourishing in the UK.
Since the provisions of the Act came into force in April 2006, all claims management companies have been required to be registered with the government. As part of the terms of their registration, they must agree to abide by a set of rules designed to protect consumers from exploitative business practices. Of most concern to the consumer are the regulations forbidding 'hard sell' tactics by these companies. It is now illegal, for example, for representatives of claims management companies to visit accident victims in hospital with a view to encouraging them to make a claim through their organisation. This practice was deemed to be inappropriate as it targeted individuals when they were particularly vulnerable. Similarly, claims management firms are now prevented from placing adverts in hospitals and surgeries encouraging patients to make claims against doctors, as it was decided that this not only increases the number of spurious claims but also compromises confidence in the medical profession.
Indeed, the Act goes some way to preventing claims against individuals who had been involved in 'desirable activities' at the time of the incident in question. The aim of these provisions is to ensure that those who find themselves in situations where they feel obliged to act (or in which they are professionally required to do so) are not fearful of any legal consequences. This, in turn, should help to tackle the perception of the compensation culture by ensuring that it is statutorily impossible to make unreasonable claims.
Claims management firms who do not register with the relevant legal body, or who do not abide by the regulations set out in the terms of their registration, will be subject to an investigation by the Secretary of State for Constitutional Affairs. If they are found to be in breach of the Act they will be subject to a sizeable fine, and possible criminal proceedings. The punitive measures to which these rogue firms will be subjected are, therefore, hopefully sufficient to ensure general compliance.
The Act also makes provisions for a more effective compensation process for victims of asbestos-related lung cancer, or mesothelioma. This is covered in more detail in an article concerning asbestos compensation, which can be found elsewhere on this site.