The MoJ is responsible for issuing claims management firms with their licences and has already authorised around 800 businesses to provide claims management services in the financial services sector.
It says since late summer 2008 it has seen a rise in the number of claims businesses offering to help consumers bring unenforceable consumer credit agreement claims.
Kevin Roussell, head of the claims management regulation department at the MoJ, says: “We have been concerned about this development – particularly where consumers are persuaded to rush to sign up to making a claim, and upfront fees are involved.”
Mal McConechy launched Liverpool-based Loan Resolutions last year and specialises in complaints relating to the Consumer Credit Act.
He says: “It does not surprise me that the MoJ is receiving that number of applications. In a few years’ time everyone will know somebody who has made a claim.”
He says a lot of firms have jumped on the bandwagon and think they can make a profit from claims management. He worries whether the MoJ will be able to cope with the demand.
“One of my concerns would be that if the MoJ is getting all these applications it will make it quite hard for it to police the sector.”