The Ministry of Justice has closed down around one in five claims management companies over the last year and almost doubled the number of MoJ staff responsible for regulating claims firms.
A freedom of information request submitted by the Law Society Gazette found the MoJ’s Claims Management Regulation department cancelled the authorisation of 734 claims firms in the year to the end of March.
The closures brought down the total number of authorised claims firms to 3,018.
The MoJ has set up a dedicated team to deal with poor practices by rogue claims firms who solicit claims for missold payment protection insurance.
The number of MoJ staff that have been allocated to regulating claims firms has risen from 32 in 2007, when the MoJ took over claims management regulation, to 57 currently.
The MoJ launched an investigation last month into claims management companies after a wave of invalid compensation claims on behalf of customers allegedly missold PPI.
The Government has admitted it needs to do more to address the “dodgy practices” used by some claims firms with justice minister Lord McNally telling the House of Lords earlier this month there may be a “better home” for the regulation of CMCs than the MoJ. In January, the Financial Services Compensation Scheme revealed over three quarters of the PPI claims it received between 2008 and 2011 came through claims management companies.
Claims management companies accounted for nearly half of all cases received by the Financial Ombudsman Service during 2011.