First4Lawyers questions Claims Management Regulation fee rise

First4Lawyers has said that proposals to raise the fees for claims management regulation by up to 180% are totally disproportionate to market conditions.

The claims management company has also questioned the methodology behind the Ministry of Justice’s (MoJ) proposals to increase regulatory fees and said that it is very disappointed to see “very little supporting data from the Claims Management Regulator (CMR) at the MoJ around market forecasts.

“The CMR’s own annual report shows that turnover has fallen across CMC’s by 30% generally and 21% across personal injury CMC’s between 2013 and 2014,” said First4Lawyers in its response to the MoJ’s consultation on the matter.

“The number of CMC’s operating fell during the same period by 22%. It therefore is understandable that the CMR will need to increase fees or revise the way it does business moving forward.

“However in a contracting market why is the CMR’s budget increasing by 6.4%? Natural economics suggest that a smaller market requires fewer resources to manage.”

The CMC also said that there was an unbalance between the proportion of revenue it was expected to contribute to the cost of running the CMR compared to the recent proposals for the funding of the new complaints handling body within the Legal Ombudsman.

Based on its own turnover estimates, First4Lawyers says that the proposed funding of regulation fees would see a real term increase in costs to First4Lawyers of between 81% to 87%. It said that this would be in addition to an estimated £25,000 that the company will start paying in 2015 to fund the complaints handling service.

“In the space of 12 months First4Lawyers contributions to the CMR and Legal Ombudsman will have increased by over 132%, an additional £72,689 per year,” it said.

“This isn’t a comparable and fair increase within any market place and adds an additional cost to the business that will have to absorb as under LAPSO compliance we cannot pass it onto solicitors as they pay us a marketing fee that has to be 100% invested in marketing activity.

“Such a sizeable increase cannot be ignored by First4Lawyers and if the CRM chooses to implement it then there will be devastating consequences for the industry and CRM indirectly.”

Mark Dugdale