New caps on financial claim fees
Fees for winning financial claims cases such as mis-sold payment protection insurance are to be capped, under proposals to protect consumers from high charges by some claims management companies (CMCs).
The Ministry of Justice plans to cap the maximum completion fee at 15% on ‘bulk claims’ with a single lender, and cap the overall charge for claims worth more than £2,000 at £300.
The government said the changes will stop companies charging ‘exaggerated prices’, which it said can amount to as much as 40% of total financial compensation.
According to the government, CMCs have taken an estimated £3.5bn in charges since 2011. It said that there is ‘widespread concern’ from consumer groups, banks and insurers that CMCs continue to make speculative claims through aggressive marketing and nuisance calls.
The proposals also include introducing a maximum ‘cancellation’ fee of £300 for bulk claims, as well as bans on referral fees for PPI or packaged bank accounts claims, upfront fees, and fees where no relationship is found between the consumer and a lender.
The MoJ has also proposed capping the maximum fee to 25% of total compensation in any other financial cases.
Justice minister Lord Faulks (pictured) said: ‘Some claims management companies charge as much as 40% of the final compensation awarded for very little work. This has got to stop, and this government is taking action to make sure people aren’t being taken advantage of by these greedy practices.’
The proposals build on plans first announced by the chancellor George Osborne in the 2015 summer budget. An eight-week consultation starts today.