The Insurance Brokers Registration Council (IBRC) is threatening to sue about 500 brokers who have failed to pay a levy imposed for the mis-selling of pensions debacle.
Some of the firms which have failed to pay owe just £40.
Legal costs which arise in its pursuit of defaulting brokers would come out of the levies already paid in by fellow brokers.
The move comes as the IBRC is stepping up pressure on the Treasury to alter its regulations for the benefit of brokers.
Its immediate concern is the impending elections of its members which the Council argues is a waste of time and money, considering that the Government intends to scrap the IBRC in the near future.
The council also has asked for the rules governing the submission of accounts and professional indemnity details to be changed.
Chairman Alan Gavaghan said the threat to sue over the levy was regrettable but that the IBRC had no other option.
"Unfortunately, the majority will be paying for the few," Gavaghan says.
"This is a matter of principle and the IBRC would be failing its duty if we did not act."
Letters have been sent out this week warning brokers that the levy would be pursued through the courts.
A number of general insurance brokers are felt to have taken umbrage about paying for a scandal they had nothing to do with. They have never sold a pension policy.
IIB director general Andrew Paddick warned brokers that the the legal costs incurred would make non-payment of the levy absurd.
"Pay up now or pay the price in the court," he said.
The levy, which was the first in the IBRC's 22-year history, was heralded as a great success by council members when it was announced in April.
The Council struck a deal with the Financial Services Authority to meet just one-sixth of the £2m estimated compensation for pensions miss-selling as well as other investment business left by brokers that have gone out of business. But the levy was increased slightly in case the IBRC had to fund this very situation.
In addition, the IBRC is lobbying the Treasury to cancel its elections which would save the Council about £30,000.
The three national council positions come up for election in November, but the behind the scenes administration would have to start in the next couple of weeks.
The positions are currently held by John Greenway MP, Michael Slack and Graham Gomm.
Gavaghan argues that elections would be a waste of time and money as the council is to become defunct.
The Government has announced it will repeal the Act that formed the IBRC in the near future.
"It would be better if the Treasury changed the rules to allow the three current national council members to continue in their posts until the Act is finally repealed," Gavaghan says.
The Treasury can exercise powers, called positive orders, which enables rules to be altered without Parliamentary approval.
The three regional council positions would come up for election in another two years, probably after the IBRC has been wound up.
