Out-Law / Your Daily Need-To-Know

Number of claims management companies falls as tighter regulation takes hold

08 Aug 2017, 10:17 am

The number of authorised claims management companies (CMCs) in the UK has fallen by 57% since 2011, with industry turnover also declining, according to the industry regulator.

The Claims Management Regulation Annual Report 2017 (51 page / 1.21MB PDF) showed that industry turnover fell 3% in 2016/17 to £726 million, the third successive year of decline. However turnover in the financial claims sector increased by 2% to £541 million despite a reported reduction in redress for payment protection insurance (PPI).

The regulator said the financial claims sector was “top heavy” with six companies handling more than half of all PPI complaints and the 13 largest companies accounting for over 50% of turnover. In total there were 674 authorised financial claims companies last year, a drop from 790 the previous year.

In March the Financial Conduct Authority (FCA) confirmed a deadline of 29 August 2019 for any new complaints relating to historic cases of potentially mis-sold PPI.

According to the report, complaints about mis-sold short-term loans continued to increase last year, rising 227% to 10,529 complaints. Earlier this year the Financial Ombudsman also revealed that complaints about payday loans had increased by 22% since the beginning of 2016, while PPI remained the most complained-about product.

The FCA recently announced it was maintaining a cap on the fees charged for such loans although it was continuing to monitor the market.

Turnover for the personal injury sector fell 15% between 2016 and 2017 to £182m. Personal injury CMCs still account for the greatest number of authorised companies, with 752 businesses now operating in this area down from 979 in 2014/15.

The Claims Management Regulation Unit issued £1.1m in fines last year and cancelled the licences of 69 companies, while issuing 169 warnings. It conducted 369 CMC audits and more investigations into non-compliant companies than in any previous year.

The CMC sector is facing imminent regulatory change with responsibility for regulation due to move to the FCA from the Ministry of Justice. In June the government laid the Financial Guidance and Claims Bill before parliament. The legislation is expected to lead to a much stronger regulatory framework and significantly reduce widespread malpractice in the CMC industry.