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Hundreds of claims firms close following referral fee ban

July 23 2013

Hundreds of claims management companies who referred personal injury cases to solicitors have left the industry following changes to the law.

Latest figures show the number of claims management companies registered to handle personal injury claims has fallen from 2,435 in March 2012 to 1,700 in June 2013.

The sharp decline follows changes to the law around ‘no-win, no-fee’ deals passed by the Government in 2012 and brought into effect in April 2013.

These included a ban on the “referral fees” which used to be paid between solicitors and claims firms.

The figures were included in the annual report of the Claims Management Regulation unit, based at the Ministry of Justice, which is responsible for regulating the companies which advertise for claims and handle them on behalf of people pursuing compensation.

The unit has been enforcing the ban since April, visiting more than 450 companies in England and Wales – leading to further investigation of 141, action taken against seven and 13 surrendering their licence to trade.

Justice Minister Helen Grant said: “We have taken strong action to rein in the rogue firms which have gathered in this sector and the impact is now starting to show.

Kevin Rousell, head of the Claims Management Regulation unit, said: ”It is our absolute priority to protect customers and we are making certain that firms are following the rules at a time of major change for the Claims Management industry.

“We do not tolerate bad practice and continue to take action against companies which break the rules, including removing their licence to trade. We shut down more than 200 last year.”

For more information about enforcement action taken by the Claims Management Regulation unit click here