MOJ Issues Regulation Bulletin to CMCs

cash claimsFines, fees, advertising standards and Legal Ombudsman procedures are just some of the issues covered in the Ministry of Justice (MoJ)’s December 2014 bulletin on claims management regulation.

Concerns have been raised in the past that claims management companies (CMCs) have been able to avoid enforcement action by cancelling their authorisation before the MoJ has completed its investigations into their alleged misconduct. However, for all alleged breaches of the rules that took place on or after December 9 2014, a CMC that is under investigation will be prevented from cancelling its authorisation unless it obtains the specific consent of the MoJ to do this.

The implementation date for the new fines regime has been confirmed as December 29 2014. From this date, the MoJ will have the power to impose fines of up to 20% of turnover on CMCs who are guilty of misconduct. Guidance on the fines system will be published shortly.

Further information will also be provided in the near future regarding CMCs coming under the jurisdiction of the Legal Ombudsman. This much delayed event is finally set to happen on January 28 2015. From this date, customers of CMCs who are dissatisfied with the company response to their complaints can refer the matter to the Ombudsman, who can order the company to pay up to £30,000 in compensation.

The MoJ has published a consultation paper regarding the fees to be paid by CMCs in the 12 months to March 2016. This consultation ended on December 18 2014. The MoJ is proposing an increase in the standard application fee from £1,400 to £2,000.

According to Scott Robert, the proposed annual regulation fees are as follows:

  • (Annual) turnover of under £5,000 – £200
  • Turnover of £5,000 to £14,999 – £350
  • Turnover of £15,000 to £24,999 – £500
  • Turnover of £25,000 to £74,999 – £650
  • Turnover of £75,000 to £88,889 – £800
  • Turnover of more than £88,889 – either 0.9% of turnover, capped at £100,000; or 0.9% of turnover up to £1 million, 0.8% of turnover between £1million and £5 million and 0.75% of turnover above £5 million, all with no cap

The ‘uplift’ – the additional amount paid by CMCs who handle financial services claims – will remain unchanged at 0.145% of turnover from financial services activities.

Fees for funding the Legal Ombudsman service will be:

  • Turnover of under £5,000 – £75
  • Turnover of £5,000 to £14,999 – £150
  • Turnover of £15,000 to £24,999 – £250
  • Turnover of £25,000 to £74,999 – £340
  • Turnover of £75,000 to £163,636 – £540
  • Turnover of more than £163,636 – 0.33% of turnover up to £1 million, plus 0.22% of turnover between £1 million and £5 million, plus 0.18% of turnover above £5 million, all subject to a cap of £40,000.

All CMCs should expect to be asked in February 2015 for their annual turnover figures for the 12 months to November 30 2014.

Finally, CMCs are reminded of the Advertising Standards Authority (ASA) Codes of Practice. Companies can be held to account by the ASA for breaches of these codes, and the MoJ can also take enforcement action, which from December 29 will include the power to impose fines, as explained above.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.