CMCs pre-empt referral fee ban

Although the Ministry of Justice is going to ban the practice of referral bans in personal injury compensation cases, this might not put an end to problem.

Some claims management companies have pre-empted the change and agreed deals with personal injury solicitors whereby they become alternative business structures. This would mean the claims management company would in effect become the advertising section of the legal entity.

Vamco, the car accident claims manager, indicated last month that it wanted to invest in a personal injury law firm and the ban could see more companies following suit.

The Solicitors Regulation Authority has not yet been granted the licence it needs to authorise ABSs but a lot of companies are interested in taking law firms in-house. A number of firms already have pre-contracts drawn up and are just waiting until the SRA gets its licence.

Jonathan Djanogly, the Justice Minister, welcomed the amalgamation idea recently saying mergers would bring claims management companies under the jurisdiction of the SRA and that would provide consumers with greater protection. He went on to say that it would be hard to make it a criminal offence to accept referral fees because it would be nigh on impossible to prove in court.

The Claims Standards Council has asked the coalition to define referral fees and provide more clarity about the way the ban will be enforced.

Meanwhile, a national firm of personal injury lawyers has seen their annual revenue from personal injury claims increase to more than £4 million. Express Solicitors specialises in no win no fee cases and attributes its success to its specialist knowledge and continued expansion.

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