In a change planned for next year complaints about claims firms will be handled by the Legal Ombudsman which holds powers to force companies to pay compensation or provide other forms of redress.
Justice Minister Shailesh Vara said: “Consumers should be in no doubt that the bad companies out there are being dealt with.
“We have already ended the licenses of more than 1,000 companies and tough new powers are now being brought in across the board.
“This latest change will make sure people who get a bad service can get redress.”
This is the latest stage of the government’s work to bring bad claims companies into line which has already moved to prevent firms taking fees from customers before a contract is signed and banning companies from offering cash or gifts for profitable claims.
Nick Baxter, independent chairman of trade body the Professional Financial Claims Association, said: “The debate about how and who should manage consumer complaints about claims management companies has been going on for far too long.
“The PFCA welcomes today’s announcement and the clarity it brings.”
Baxter said companies which provide an ethical and professional service to their customers have nothing to fear from these changes.
He added: “Members of the PFCA follow a strict code of practice and their compliance with it is independently audited.
“The PFCA is already working with regulators and consumer groups to raise standards and these changes reinforce the work that has already been completed.”
The law is being changed through the Financial Services (Banking Reform) Bill to enable the Legal Ombudsman to start handling claims management complaints.
The Ministry of Justice and Legal Ombudsman have begun working towards the change planned for later in 2014.
