MoJ to impose extra fee on claims managers involved in financial services

The MoJ is to impose an additional regulation fee on claims management companies handling cases relating to financial products, such as PPI.

The ministry said the turnover of CMCs in the financial products and services sector increased by 66 per cent last year.

Announcing its plans for fees for the next financial year, MoJ officials said: 'There continues to be concern about the level of malpractice seen in the financial products and services sector '“ reflected in the fact that the proportion of consumer complaints received about this sector remains significantly high at upwards of 90 per cent of all consumer complaints received.

'The regulator is committed to tackling bad practices within this sector and will continue to undertake specifically-focused compliance projects.

'With more regulatory resource applied to the financial products and services sector, consideration needs to be given to whether those claims management companies operating within this sector should bear a larger proportion of the costs of regulation.'

The MoJ said, as a result, that it proposes to charge CMCs operating in the financial services sector an uplift on their fees, calculated at 0.125 per cent of annual turnover with a cap of £25,000.

Officials also pointed out that the turnover of CMCs in the personal injury sector had increased by 33 per cent over the past year.

While retaining the current regulation fee scales for 2013 to 2014, officials proposed that the caps on annual fees, of £30,000 where there was a contractual relationship with a client and £17,500 where there was not, would be abolished for companies working in the personal injury and financial services sectors.

In a further step, the MoJ said the application fees for new CMCs would rise from £950 to £1,400 next year.

'This is a reasonable sum that can be factored into start up costs and recouped without difficulty by most claims management companies once they gain authorisation and begin to trade.'

The MoJ warned CMCs that once the Legal Ombudsman took over responsibility for complaints about them, at some point after 2013, the costs could amount to £3m over three years.

Those costs would be charged back to the claims management regulator, though LeO had estimated it could raise £500,000 to £700,000 in case fees from CMCs and this would be deducted.