600 CMCs stopped trading within 12 months of the LASPO Act

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The Government has released new figures showing that nearly 600 claims management companies (CMCs) ceased trading between April 2013 and March this year.

According to the Ministry of Justice, there were a total 2,693 CMCs in business last April, when the Legal Aid Sentencing and Punishment of Offenders (LASPO) Act was introduced. By March 2014 this number had fallen to 2,097.

Government officials have said that the fall is a direct result of the “tough new rules” introduced into the sector, including higher regulation fees, a new set of fines for CMCs that breach marketing rules and banning law firms from paying referral fees to claims companies.

Justice Minister, Lord Faulks said that the reforms had turned “the tide on compensation culture”.

“What we have already seen is that this has had a significant impact on the amounts people are having to pay [for car insurance]and the departure of a large number of claims companies will be welcomed by many,” he said.

Kevin Rousell, head of the Claims Management Regulation Unit said that the drop in CMC numbers would not stop it from continuing to pursue “rogue” CMCs.

“No regulator can ever stand still and we are going further,” he said.

“The new fines we are introducing this year will give us the power to impose tough sanctions on those firms that flout the rules with much more precision, power and proportionality than ever before.”

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Marek Handzel

Marek Handzel is the editor of Claims Magazine. Marek welcomes articles, letters, or feedback from readers and can be reached by emailing marek.handzel@barkerbrooks.co.uk