Attempts to get debt free may be boosted by referral fee ban

For many of those trying to get debt free the rising cost of living has been a problem, with drivers being among those hardest hit. However, new legislation may change this.

While recent increases in fuel prices have been one problem, they are not the only one. The soaring cost of motor insurance has been an issue for many and concerns about this have centred on the frequent point that premiums are being inflated by rising costs for insurers as they face numerous compensation claims.

One key reason identified by the government and consumer groups for the high volume of cases is a growing compensation culture, with no-win, no-fee cases encouraging drivers to take a risk-free punt at getting some money, while lawyers and others are encouraged to pursue these by the payment of referral fees from claims management companies.

The net result of all this is that insurers face more claims and their growing cost base forces up premiums – which means drivers have their personal finances squeezed and those in debt have less free cash to pay it off with.

But the government has now said it is to ban referral fees in order to tackle this compensation culture.

Justice minister Jonathan Djanogly remarked: “Honest motorists are seeing their premiums hiked up as insurance companies cover the increasing costs of more and more compensation claims. Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents.”

He also noted there is already legislation before parliament to end no-win, no-fee cases.

The news was welcomed by executive director of consumer group Which? Richard Lloyd as “great news for motorists”. For those in debt, it may be a welcome boost at a time when there have been many growing pressures on household budgets.

By James Francis