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Regulator considers cap on fees charged by personal injury CMCs

Maxwell Scott: Call for common standards

The Financial Conduct Authority (FCA) is to explore whether to use its power to cap the fees charged by personal injury claims management companies (CMCs), it has emerged.

It has also been urged to co-ordinate with the Solicitors Regulation Authority (SRA) if it decides to take action.

The Financial Guidance and Claims Act 2018 gave the FCA a duty to make rules restricting charges for claims management activities in relation to financial services and financial products claims.

It also provided powers to make rules restricting charges for claims in the other claims sectors it regulates – personal injury, specified benefits, criminal injury, housing disrepair and employment matters.

It is now exploring whether it is necessary to introduce fee caps and, if so, how it should do this. To inform this work, it is sending an information request to a representative sample of CMCs, and will also talk to CMC customers, following which it may issue a consultation paper.

A year ago, the Treasury said [1] the government “does not currently believe there is a need for a cap on fees in relation to personal injuries”, but the notice sent out to CMCs about the information requests did not reference this.

Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations – the recently formed trade association [2] for the claims sector, said all reputable CMCs would support the aim of providing consumers “with the clarity and certainty they need to make informed decisions before they enter into a contract” with a CMC.

He said that given many personal injury CMCs referred work to law firms regulated by the SRA – and would continue to do so after next year’s Civil Liability Act reforms – “a consistent regulatory landscape” was needed to avoid consumer confusion.

He continued: “We urge the FCA and SRA to work together to create common standards. Fee-capping can be appropriate for simple disputes, such as PPI claims, where the process is straightforward.

“Personal injury and other legal cases involving detailed processes and often complex legal issues do not fit so easily within a capped environment. We therefore recommend that the regulators assess how the market adapts to regulatory change before considering fee caps.”

Mr Maxwell Scott argued that an “ill-considered cap” could lead to businesses refusing to represent deserving customers.

“Regulators must ensure that any new regime protects access to justice for consumers as well as preventing exploitation and poor practice.”