Citizens Advice has welcomed new legislation to help consumers challenge unfair treatment by claims management companies (CMCs).

As the Ministry of Justice outlines plans for the Legal Ombudsman to gain new powers to tackle CMCs which break the rules, the national charity is calling for more action to to stop unscrupulous firms from treating people badly in the first place.

Gillian Guy, chief executive of Citizens Advice, said: “People have felt powerless against claims firms who promised big payouts only to take up front fees and not deliver a good service. Consumers need a robust route to challenge claims management companies that mislead people or leave them out of pocket, so it’s good news that the Legal Ombudsman will soon be able to force them to give compensation.

“Companies must be up-front about the costs of making a claim, give clients proper cancellation rights and make sure that all consumers have a signed, written contract. From next year, the Ombudsman will be able to help people who fall foul of bad CMCs, but we need to see more action to stop dodgy firms from treating consumers unfairly in the first place.

“Our research has found that over 30 million people in the UK have been cold called about PPI alone, with only 2% of people saying that they had given permission to be contacted in this way. A ban on cold-calling by claims firms would let consumers know that anyone who contacted them out of the blue was not to be trusted.”