The Ministry of Justice is considering transferring the regulation of claims management companies to the Financial Conduct Authority, it has emerged. The aim is to bring in a “much more rigorous regulatory regime for CMCs”.
The Legal Ombudsman has received just under 1,000 consumer ‘contacts’ about claims management companies in its first three weeks of complaints handling, it has emerged.
The Legal Ombudsman has recruited a team of 30 to deal with the thousands of complaints about claims management companies it will receive from today, it has emerged.
Claims management companies (CMCs) which break the rules this year face potentially huge fines – of up to 20% for those with an annual turnover of more than £500,000. Smaller CMCs can be fined up to £100,000.
The Claims Management Regulator has warned over 65 claims management companies about their compliance with the referral fee ban in the first three months of this year, it has emerged.
Claims management companies will have to pay a separate ‘Lord Chancellor’s complaints fee’ of up to £40,000 on top of their annual regulation fee with the shift in complaints handling from the Ministry of Justice to the Legal Ombudsman.
Claims management companies have pocketed up to £5bn of the £22bn of compensation secured by consumers for mis-sold payment protection insurance, according to an analysis by Citizens Advice.
There was a sharp increase in the number of claims management companies closing down in the first three months of 2013 ahead of the referral fee ban coming into force, Legal Futures can report. The news comes as the government announces a tightening of CMCs’ conduct rules.
The government is not currently planning to set an upper limit on payments that are exempt from the referral fee ban as “consideration for services”, it has announced. The news came as the Claims Management Regulator issued preliminary guidance on how it will approach the ban.
We kind of all knew it anyway, but just how much money a large insurance company like the Direct Line Group makes from referral fees still took my breath away. As we reported earlier this week, the group received £110m from solicitors in the three and a half years since January 2009. Call it £30m a year and extrapolate (the group’s market share is 19% of motor and 18% of home insurance) and you are looking at around £150m a year going from the pockets of solicitors to insurance companies for the privilege of receiving cases. And that’s before the £100m or so insurers make every year from credit hire referral fees.