Claims management companies could be fined up to 20% of their turnover for obtaining information through cold calling and spam texts under new powers proposed today.
The Ministry of Justice today said the new fining power could mean some companies will be fined millions of pounds if they breach data protection laws.
The measure appears in a consultation on how to penalise companies that breach Claims Management Regulation Unit rules.
Regulators want the power to impose a financial penalty as an alternative to the current powers to vary, suspend or cancel authorisation of a CMC. This is partly to protect clients of the firms from their CMC closing and, it is understood, to prevent rogue companies from simply reforming as a different entity.
Justice secretary Chris Grayling (pictured) said: 'It is time to stop these claims companies from plaguing hardworking people's lives and wasting everyone's time - the scale of these fines shows just how serious we are about stopping them.
'The claims management regulator already takes tough action against companies which break the rules, suspending and closing down rogue firms, but now these fines will give us an extra weapon to drive bad behaviour out of the industry.'
A consultation will also be started later this year on lowering the threshold for when the Information Commissioner's Office can fine companies. Currently calls must cause 'significant damage' or 'substantial distress' to attract monetary penalties.
Next week regulations will be laid in parliament to simplify how Ofcom, the telecoms regulator, can share information with the ICO and insolvency services about rogue companies.
Legally, unsolicited live direct marketing calls cannot be made to a number that is registered with the Telephone Preference Service unless the person has agreed to receive calls by that company. All automated recorded marketing message calls require prior consent.
Earlier this month, the ICO warned solicitors to check where cases had originated to ensure they were not the product of cold calling or spam texts.
It reported that a record number of complaints have been made linked to accident claims - with 1,645 received during the last three months of 2013.