By: 6 February 2015
MoJ decides to go ahead with significant claims management fee increase

The Ministry of Justice (MoJ) has confirmed that it will implement a large increase in fees for claims management companies (CMC).

From April this year, CMCs will see their application fee go up from £1,400 to £2,000, while the percentages of annual turnover levied above the flat-fee threshold of £88,889 will increase to 0.9% for an annual turnover up to £1 million; 0.8% of annual turnover up to £5 million; and 0.75% of annual turnover over £5 million.

The fees caps on both the annual regulation fee and the financial products and services fee will also increase to threefold to £150,000.

The Government’s decision comes after a consultation on the matter which raised concerns about the sharp rise costs during a tough economic climate for the claims sector.

Andrew Cullwick of First4Lawyers said: “While we accept that the Claims Management Regulator needs to be self-funded and the business landscape has changed over the last couple of years, we are somewhat disappointed that our reward for implementing best practice and good governance is to end up with a real terms increase of around 130% in the fees we are expected to pay to cover the CMR and Legal Ombudsman’s activities.

“We hope that these increases and the introduction of a dedicated complaints handling service will deliver some positive change to the sector eradicating those firms that flout the regulations and participate in unacceptable marketing activities,” he added.

In its response to the consultation, the MoJ said that it had taken note of comments that it was unfair to increase regulatory costs in the face of a decreasing claims market.

“However as stated in the consultation, because detriment caused to consumers and others affected by claims management activities has always been attributed to a small number of companies whose actions have a disproportionate effect, regulatory costs over 2015-16 are not forecast to reduce given there has been no corresponding reduction in the number of regulatory interventions carried out,” it said.