MoJ blames ban on referral fees and incentives for closures

The number of personal injury claims management companies (CMCs) has dropped by 22% since the Legal Aid, Sentencing and Punishment of Offenders Act (Laspo) reforms came into force in April.

Figures from the Ministry of Justice (MoJ) revealed that it had visited around 700 personal injury CMCs since the Laspo reforms became law and identified and stopped seven unauthorised businesses from trading.

The MoJ also confirmed more than 400 personal injury CMCs have surrendered their licences since April.

 In its latest update on the sector the MoJ revealed there were 1,485 personal injury CMCs at the end of September compared with 1,902 at the end of March (see graph below).

In its update the MoJ said: “This [reduction in the number of CMCs] is almost wholly as a result of the civil justice and related reforms to this sector introduced in April 2013 – primarily the ban on referral fees and ban on CMCs offering financial rewards or similar benefits to potential claimants as an inducement to make a claim.

“We anticipate that the personal injury claims market will continue to contract in 2013 and beyond as CMCs that are unable to adapt their business model to comply with the referral fee ban exit the market.”

The report also revealed annual CMC turnover for the personal injury sector was down by 22% in the 2012/13 financial year.