In the Media

Major CMCs win argument on MoJ fees

PUBLISHED February 8, 2013

Friday 08 February 2013 by John Hyde

Large claims management companies (CMCs) have convinced the government to reinstate a cap on the fees they have to pay for regulation.

The Ministry of Justice, which regulates CMCs, had planned to remove the annual cap of £30,000 for companies with contractual relationships with clients.

Although the majority of respondents to a consultation agreed with removing the cap entirely, larger CMCs successfully argued for a new cap of £50,000.

An MoJ response said the revised figure struck an 'appropriate balance' between meeting regulatory costs and a fair setting of fees.

Companies with a turnover more than £132,653 will pay 0.49% of their turnover in annual fees. For those turning over more than £1m the percentage reduces to 0.332% and companies with turnover above £5m will pay out 0.24%.

Fixed fees reduce incrementally for companies with a turnover less than £132,653, with the smallest firms paying a £200 fee. The application fee to become a regulated CMC will increase from £950 to £1,400.

The MoJ said fees had to increase to mitigate the anticipated reduction in CMC numbers.

The growth of alternative business structures, the ban on referral fees in personal injury and government reform of civil litigation are all factors expected to have a significant impact on the sector.

The MoJ response said: 'Taking into account the potential for a reduction in the regulated claims market, changes to the current fee structure are needed to ensure that regulatory costs for 2013-14 are fully recovered from those that are regulated.'

The consultation found an 'overwhelming majority' of respondents opposed to CMCs paying for the handling of complaints by the Legal Ombudsman.

The consumer watchdog is set to accept complaints about CMCs later this year, with the cost of widening its scope estimated at £3m.

Claims management companies felt this estimate was too high and were unwilling to pay an additional fee for complaint-handling.

A further consultation on fees payable for complaint-handling will be ordered for later this year.

Meanwhile, the MoJ reported a specialist team created to crack down on bad practice in the payment protection insurance (PPI) claims market has helped tackle more than 200 rogue firms and is being strengthened to monitor even more companies.

The team was set up by the MoJ's claims management regulation unit to monitor the hundreds of firms that deal with PPI and offer customers help to claim compensation from banks, building societies and others which mis-sold them PPI for credit cards and other financial products.

A new report from the unit, which has banned 103 PPI firms from business and warned 149 for poor practise in the last year, found the main causes for consumer concern were: misleading marketing, high-pressure selling, poor complaints systems and unclear fees.