Financial services CMCs double revenue to £340m

Financial services claims management companies, which work almost entirely on PPI cases, have more than doubled their annual revenue to 340m, a report for the MoJ has revealed.

Personal injury CMCs are experiencing very different fortunes, with 735 closing their doors from March 2012 to June 2013 and revenue falling by 22 per cent to £101m.

The total turnover of CMCs for the year to 30 November 2012 increased by 31 per cent to £1.01bn, according to the annual report of the Claims Management Unit (CMU), published today.

According to the report, the number of financial services CMCs rose during the last financial year by 180 to 1,155.

"One of the main features of this sector is that it generates the overwhelming majority of consumer complaints we receive (94 per cent)," the CMU report stated.

"Another feature is that the turnover of this sector has increased considerably during 2012/13 due to the growth of activity in the PPI claims market.

"This is a reflection of the fact that more than £9bn has now been paid out in redress to consumers who were missold PPI (with almost £6bn paid during this 12 month period).

"The ongoing high level of activity and consumer interest in the missold PPI claims market means that there has been little incentive for CMCs in this sector to explore other claims areas."

Claims management regulator Kevin Roussell has promised further measures to tackle the PPI claims industry, including more resources for investigation and enforcement and better information sharing with the Financial Ombudsman Service and Financial Conduct Authority.

To enforce the personal injury referral fee ban, the CMU said it had visited more than 450 companies in England and Wales, investigated 141 and taken action against seven.

"We have taken strong action to rein in the rogue firms which have gathered in this sector and the impact is now starting to show," justice minister Helen Grant (pictured) said.

"Ending these fees which fuelled a growing compensation culture has been an important step to reducing the cost of living for ordinary people - who have ultimately been footing the bill for them through their insurance premiums."

In the sector as a whole in the financial year 2012-13, the CMU cancelled the trading licences of 211 companies, audited 129 and issued formal warnings to 285.

Earlier this year tougher rules were introduced to protect consumers, including a ban on firms taking fees from customers before a written contract had been agreed and signed and a ban on advertising offering inducements, such as cash or gifts.