Compensation claims made easy?


Opportunities for consumers to take on businesses they believe have treated them unfairly and seek compensation in the courts could be stepped up.

New regulations came into force in May giving UK consumers more protection. The rules allowed agencies such as the Office of Fair Trading (OFT), but not individuals, to take action against businesses trading unfairly.

The government department says that consumers can already seek compensation through common law for most issues in the new regulations although they lacked a way for consumers to claim compensation when businesses act unfairly.

"The Department for Business, Enterprise and Regulatory Reform has failed to give consumers the tools they need to benefit from the broad scope of the
regulations," a NCC spokesman said.

The government now wants the Law Commission to review the legal issues for private redress. The move could potentially help people who want to take businesses to the civil courts to ask for compensation. This could cover a wide range of issues from misleading statements by estate agents to aggressive
sales practices or debt collection.

In Ireland, a civil redress mechanism has been in place since last year. Sadly, the UK was slow off the mark so a fully functioning compensation system is still some way off. This new system would increase consumer protection in the UK and provide the vulnerable with the tools necessary to make compensation claims against rogue traders. The Law Commission had previously booked in the review for 2010.

As the means to gain compensation becomes more accessible it highlights many concerns. Lloyd’s chairman Lord Levene has repeated his warning that litigation is driving the emergence of a US-style compensation culture in Europe. He said of the dilema at the Lloyds 360 debate this year, “The fact that 15 percent of companies have seen lawsuits brought by regulatory authorities is perhaps also indicative of change in the strategies of enforcement authorities – who are increasingly willing to initiate criminal actions”.

The review of the April 2007 Compensations Act has also picked up on the need to regulate the malpractice of the compensation claims system. The review, according to the ministry of justice (MoJ) has helped to regulate the industry. Within its first year, the review has managed to achieve some success. Compensation advertising in hospitals, cold calls, hard sell tactics and the unclear use of the term “no win, no fee”, have all been removed or reduced. All claims companies now have to register with the government. Within the first year of the legislation, 52 out of 1,700 claims management companies have been cancelled or suspended. Along with the Solicitors Regulation Authority (the SRA) the ministry has focused it’s energies on the rise in fraudulent claims where accidents were contrived or induced. 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.

The new reforms are intended to increase consumer protection and eliminate traders who partake in unfair and misleading strategies. However, the changes
leave businesses and employers uncomfortable at the thought of being on the wrong end of a contrived compensation claim. The increase in claims has also resulted in a bizarre twist, as claimants now need protection and  insurance from unethical claims companies. Is the compensation claims system really as easy as it looks?