Turnover of CMCs increased to over £762m last year
Turnover of claims management companies increased by nearly £40m last year.
Data published by the Ministry of Justice last week shows that turnover increased to £762.6m for the 12 months to 31 March 2018, up from £726m the previous year.
Turnover in the financial claims sector was £600.3 million, over 78% of all claims, an increase of 11% in the year.
Whilst the total number of CMCs has fallen from a peak of 3,213 in 2011 to 1,238 in 2018, overall the top 25 highest grossing CMCs account for 57% of the total turnover.
Just 25 firms turned over nearly £435 million - on average over £17 million each.
CMCs have continued to come under fire for encouraging fraudulent claims this year.
And John Lamidey, co-founder of false compensation claims site www.moneycheats.co.uk, said the increasing turnover of CMCs shows bogus compensation claims are still rife.
He said: “CMCs and some no-win-no-fee law firms have been in the forefront of mounting increasing numbers of false or inflated compensation claims; primarily to do with car whiplash, holiday sickness and financial services miss-selling.
“Rarely are they brought to account although occasionally a CMC will be fined by the claims management regulator (a grand total of £279,050 in the last year) or a lawyer will be struck off for a year or two by the Solicitors Disciplinary Tribunal.
“Many firms are currently sending large batches of pro forma claims to consumer credit lenders, often when no loan has ever actually been made to the complainant.
“The logic seems to be: swamp them with claims, they will probably pay out on some, whether there is any justification for the claim or not.
“In half of the claims submitted to one lender by a claims company, no loan had even been made to any of the purported complainants.”
Looking over the past year, head of claims management regulation at the Ministry of Justice Kevin Rousell said he was pleased work in the holiday sickness claims market, and that work had continued in fighting CMC nuisance calls.
Looking to the year ahead in the report he said: “One of the top priorities in 2018/19 is to ensure that CMCs comply with the fee reforms introduced in April 2018, including the total ban on the charging of upfront fees in PPI claims.
“We will be policing with equal vigour and precision the interim cap on CMC fees in PPI claims, which was introduced by the Financial Guidance and Claims Act 2018 and comes into effect from 10 July 2018.”
Responsibility for regulating CMCs will be transferred to the FCA from April 2019, with proposed tougher guidelines already laid out.
Work will begin over the next year to transfer this responsibility, and Rousell said he was grateful to everyone that had contributed to claims management regulation in the last 11 years.
“The legacy will be a strong one for the FCA to pick up and build on,” he said.
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