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Compensation Culture: Firm Rapped Over Ads

(c) Sky News 2012

The Advertising Standards Authority (ASA) has raised fears about the activities of a claims management company while upholding complaints against it relating to text messages about compensation.

The ASA said Data Supplier, based in India, had not responded to its enquiries about the texts which were found to have breached its code.

One of the messages, judged to be in breach of the rules, said: "We have been trying to contact you regarding your PPI (payment protection insurance) Claim, we now have details of how much you are due, just reply CONFIRM and we will call you back".

The second text said: "Our records indicate you may be entitled to £3750 for the accident you had. To claim for free just reply CLAIM to this msg. To stop text STOP."

Three complainants, two of whom received the first text and one who received the second, challenged whether they were misleading and could be substantiated.

This was because they had not recently had an accident or did not believe that they were eligible to reclaim PPI payments, and suggested that the texts breached the advertising code because they were unsolicited.

The ASA said it was concerned by a lack of response from Data Supplier to its findings and apparent disregard for the code.

It said: "We reminded them of their responsibility to provide a substantive response to our enquiries and told them to do so in future.

"We noted that we had not seen any evidence to show that the recipients of the texts had given their explicit consent to be included on the Data Supplier's database.

"We also understood that none of the recipients had recently had accidents or considered themselves to be eligible to make a PPI claim, and that the texts did not identify who the message had been sent from.

It added: "The texts must not be sent again in their current form. We told Data Supplier not to send texts to consumers unless they had their explicit permission to do so.

"We also told them not to make claims in their advertising unless they could provide evidence to substantiate them, and to identify themselves as the advertiser in any future texts."

The claims management market has come under intense scrutiny this year amid concern about its behaviour in the wake of the PPI scandal - hampering efforts to get compensation to those who truly deserve a share of an estimated £10bn for mis-selling.

The insurance industry also blames 'ambulance chasing' by claims management companies (CMCs) for rising premiums.

The consumer group Which? has even gone as far as to recommend avoiding CMCs altogether while the Financial Ombudsman Service has raised questions about fee structures and MPs (BSE: MPSLTD.BO - news) are considering tighter regulation.

Among the industry's lines in its defence is that it has raised awareness of financial shortcomings to consumers and enabled people to make claims they may not have been aware of amid a deep lack of trust in the country's major institutions.