By: 19 May 2014

Claims management companies (CMCs) will be charged an additional separate fee of up to £40,000 once the Ministry of Justice (MoJ) transfers handling of complaints about the sector to the Legal Ombudsman at the end of this year.

The Ombudsman has said that it expects to handle some 3,000 complaints a year and it will require £3.2m a year in order to set up and run the new service, which will be ring fenced from lawyer complaints.

The MoJ has suggested replicating the sliding fee scale used to work out the annual regulation fee for CMCs in order to calculate how much they should pay for complaints handling.

Legal Futures has reported that the biggest CMCs would pay an amount equal to 0.33% of their annual turnover up to £1m, plus 0.22% of turnover between £1m and £5m, plus 0.18% above £5m. This would all be subject to a cap of £40,000.

CMCs with turnovers of between £75,000 and £163,636 would pay £540, falling to £340 for those with turnovers of between £25,000 and £75,000. The minimum fee would be £75.

Alan Nesbit, chairman of the Association of Regulated Claims Management Companies (ARC) told Legal Futures that the introduction of the new fee was “fine in principle”.

“The image of CMCs is shoddy at best, criminal at worst. CMCs need to understand that having an ombudsman scheme of this kind gives them a whole level of respectability which they need to have,” he said.

The consultation on the new fee structure for CMCs ends on 6 June.