Under new measures announced today by the Ministry of Justice (MoJ), claims management companies will have to get a written agreement from clients before pursuing a claim or charging a fee.

However, Gillian Guy, chief executive at national charity Citizens Advice, said the rules do not go anywhere near tackling the real problems people are facing.

She said: “Too many people have been ripped off by these predatory firms who use underhand tactics to make money from people who often don’t have a claim to make.

“The new conduct rules are extremely disappointing. The regulator has let consumers down by not banning upfront fees, barring firms from cold calling or making sure fees are in proportion to the compensation gained.”

The main focus of the financial claims sector is currently payment protection insurance (PPI) claims.

In 2012 Citizens Advice Bureaux dealt with over 16,500 problems with PPI, a third more than in 2011. Just under 3,300 of these were about claims management companies. Between April and October 2012, the Citizens Advice consumer service handled over 4,800 queries about claims management companies offering PPI compensation services.

Coming into force this summer, the new rules will mean CMCs must:

*agree contracts in writing with their clients, before any fees can be taken;

*refer to their regulatory status as being regulated by the claims management regulator – rather than the MoJ which till now could be misconstrued as MoJ and government endorsement;

*and inform clients if they are suspended or have had restrictions imposed on their business within 14 days of the enforcement action being taken.

As part of the industry wide crackdown, the Regulator has – from 1 April – also banned inducement advertising by CMCs. No longer will companies be able to target consumers through advertisements which offer vulnerable individuals a cash incentive for signing up to use their services.