Hundreds of CMCs ‘cancelled’ by MoJ

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The Ministry of Justice has closed down about one in five claims management companies in the past year, according to figures obtained by the Gazette.

A freedom of information request to the MoJ’s Claims Management Regulation department has revealed that 734 businesses were ‘cancelled’ in the 12 months up to the end of March. The closures were partly prompted by 9,570 complaints from the public. By the end of the financial year the number of authorised businesses stood at 3,018.

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In the latest broadside against the sector, the banking industry alleged this week that claims management companies are slowing down the processing of legitimate claims over the mis-selling of personal protection insurance (PPI) by sending speculative letters to every bank.

Research by the Financial Times last month showed that Britain’s banks are now rejecting as spurious up to half of all compensation claims relating to mis-sold PPI. The Ministry of Justice has confirmed it has set up a dedicated team to deal with poor practices by some claims management companies who handle mis-sold PPI.

Anthony Sultan, executive member of trade association the Claims Standards Council, said the volume of closed companies did not mean there is widespread malpractice. ‘A lot of companies have decided it is not for them and they don’t want to be in claims. It’s very important for those heavily involved in the industry that the highest standards prevail and anyone who fails to meet them is exited from the sector.’

Sultan told the Gazette he would ‘condemn’ any firms involved in speculative claims. ‘It is not widespread, and the vast majority are regulated and operate in a sensible fashion,’ he said. ‘As in any industry you come across rogue traders but the trade body acts quickly to bring an end to it.’

The MoJ said record numbers of staff are being allocated to regulating claims management companies, both at its headquarters in London and its compliance office in Staffordshire. The number of staff has risen to 57, up from 32 in 2007 when the MoJ took charge of claims management regulation.

The MoJ has cut the estimated cost of claims management regulation, financed by the companies themselves, by 17% to £2.5m for 2012/13. But rising staff costs and an expected fall in the number of companies led to higher charges to firms.

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