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Ministry of Justice Forces Claims Managers to Pay Up

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There is an expected exodus of Claims Management Companies (CMCs) from the market following the Ministry of Justice’s (MoJ) revelation of radical new changes to compensation claims management regulation.

The MoJ, which acts as the primary regulator of CMCs, is expecting a funding shortfall next year due to the ban on accident compensation referral fees which will be introduced in 2013. To make up for it, resources will be raised through a 47% increase in application fees in 2013/14 for CMCs as well as the removal on the current cap on annual fees. Without these changes, the government contends that it would be unable to protect consumers and police growing “unauthorised trading”.

The consultation document recently released by the MoJ makes known the need to tackle malpractice in the financial products and services sector, with 90% of consumer complaints related to this area. The document also dictates that:

• Application fees for CMCs will rise from £950 to £1,400

• CMCs will face fee increases in the financial products and services sector

The Legal Ombudsman’s jurisdiction is also set to increase in scope under the changes to include complaints relating to CMCs. According to the Legal Ombudsman’s office the marketing, IT, recruitment and training expenses associated with this change are likely to cost around £3m.

Far too many of us have been the recipients of unwanted spam text or phone calls from rogue claims management companies offering to help us with real or imagined injury compensation claims – the sooner the Minister of justice clamps down on these parasites, the better.

The MoJ consultation will end on 18th of December, with the new fees coming into force on the 1st April 2013.

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