The Ministry of Justice has announced a new measure to stop unscrupulous claims management companies from cashing in unfairly on the billions being paid to people who were mis-sold Payment Protection Insurance.
The firms will have to get written agreement from clients before pursuing a lucrative PPI claim and charging a fee.
Many have been randomly phoning and texting possible mis-selling victims, then signing them up on the basis of a verbal agreement and - in some cases - charging substantial amounts up front.
The Ministry of Justice has confirmed that it will implement a crackdown on the practice this summer.
Claims management firms will need to obtain customer signatures on contracts before charging for assistance over financial mis-selling and personal injury complaints.
Firms have been breaching regulations by cold-calling potential customers without prior permission. 260 were stripped of their licences by the Ministry of Justice in the latest financial year.
3,000 firms are licensed to pursue claims, many of them charging fees of 30% of the compensation paid.
PPI payouts to victims average just under £3,000. The total being paid out by the banks responsible for the mis-selling is expected to exceed £15bn.