CMCs to be hit by more fee hikes

Claims management companies face significant fees rises from April, the MoJ has announced, as it prepares to transfer complaints about them to LeO later this year.

Most annual fees paid by CMCs for the year from 1 April 2014 to 31 March 2015 will go up by 10 per cent, while the cap on total fees for bigger firms will rise by the same amount. The application fee, which last year rose from £950 to £1,400, will not be changed.

The smallest CMCs, with turnovers below £15,000 will not be affected. Fees for those with turnovers between £15,000 and £142,000 will increase by 10 per cent.

Companies with turnovers of more than £142,500 will pay a higher percentage of their annual turnover in fees, with the total cap rising from £50,000 to £55,000.

The MoJ said its Claims Management Regulation Unit would be able to increase its fees during 2014-15 "should market uncertainties result in the regulator recouping insufficient funding".

In response to a consultation on the fee changes, the MoJ said that without the increases, the cost of regulation was unlikely to be recovered.

"Several responses referred to a perceived unfairness that regulatory costs were increasing where overall, the claims management industry is contracting."

However, the MoJ said the costs of regulation were expected to increase because of PPI claims, which was likely to remain a "dominant issue" over the next year.

"Ongoing resource will also be required to police the bans on referral fees and inducements to claim," the MoJ said.

"It is not possible to fully recover the costs of operating the regulatory regime by increasing fees only by the rate of inflation if, as in recent years, the regulated industry itself causes the need for an increase in regulatory resource on a much larger scale.

"A 'polluter pays' model is not appropriate, as this does not take into account the wider regulatory costs outside of those incurred through specific enforcement action that should be applied to the wider claims management industry."