The Government has warned claims firms which use information gathered by unsolicited calls and texts or who provide poor quality services will face large fines under new law changes.

The Claims Management Regulation (CMR) Unit at the Ministry of Justice will also be expanded with more enforcement staff, funded by an uplift in fees paid by regulated claims firms, and a new set of toughened conduct rules will be unveiled this week to bear down on abuses by companies.

The number of claims firms operating has already fallen by more than 1,000 since a peak of 3,400 in 2011 to 2,300 today.

Justice Minister Shailesh Vara said: “We will not tolerate companies which waste hardworking people’s time and money through their own laziness, incompetence or frankly dubious practices.

“We are already making sure rogue companies are shut down – and now we are ensuring those who are wasting everyone’s time will pay for it.”

The fines will be brought in as part of law changes being made through the Financial Services (Banking Reform) Bill which is currently progressing through Parliament. They are expected to take effect next year, when further details on the maximum fine levels will be published.

The new rules being published by the CMR unit this week include giving claims companies a duty to make sure the claims they are submitting have a realistic chance of success, as well as ensuring full evidence is provided to back up any allegations. Firms will also have to carry out thorough audits of how data they use has been gathered, so they can no longer turn a blind eye to whether leads have been found by illegal marketing texts and calls.

Kevin Rousell, head of the Claims Management Regulation unit, added: “It is our absolute priority to protect customers and we are making certain that firms are following the rules.

“We do not tolerate bad practice and continue to take action against companies which break the rules, including removing their licence to trade. Issuing fines will be an important new weapon for us.”