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The Financial Conduct Authority (FCA) today published new rules and fees that will apply to all claims management companies (CMCs)from April 2019. Thats when the FCA takes over responsibility for regulating the firms, which help thousands of people every year.
From next April, all CMCs set up or serving customersin England, Scotland and Wales will have to be authorised by the FCA to continue operating legally. To be authorised by the FCA they must demonstrate they meet minimum standards to operate. Any firm that isnt authorised will have to stop handling claims.
In Claims management: how we will regulate claims management companies, the FCA aims to ensure that CMCs are trusted providers of high quality, good value services that help customers pursue legitimate claims for redress, and benefit the public interest. It focuses on three main areas:
- Customers wanting customers to be empowered and confident in choosing a value-for-money service which is appropriate for their needs.
- CMCs wanting CMCs to help customers get redress in a way that complies with FCA rules and requiring them to meet a common set of standards.
- Regulatory regulating in a way that prioritises high standards of conduct, protects consumers and improves public confidence in claims management services
Jonathan Davidson, Executive Director of Supervision Retail and Authorisations at the FCA, said:
We are ready to take over regulation on 1 April 2019. The new regime aims to drive up standards in a sector whose reputation has been tarnished by some companies engaging in high pressure selling and by failing to provide clear information on the fees they charge.
The new rules will ensure firms are transparent about their estimated fees before the customer signs on the dotted line, and notify customers of free statutory ombudsmen or compensation schemes. Its vital that customers have the information they need to make informed decisions. We will take action against those that break the rules.
In addition, all firmshave to record and retain customer telephone calls for a year after their final contact with a customer.
The next major milestone for firms starts in January. Thats when CMCs can apply for a temporary permission to operate. This will allow them to continue operating until they are fully FCA-authorised during one of two waves running from April until the end of July.
Background
- PS18-23 - How we will regulate claims management companies
- There are about 1,200 claims management companies currently operating in the UK. The number has been reducing in recent years with the industry shrinking for the last three years
- Concerns about misconduct by some CMCs sparked a government review that led to a change in regulation
- The Financial Guidance and Claims Act 2018 (FGCA) transfers the regulation of CMCs from the existing Claims Management Regulator (CMR), which is part of the Ministry of Justice (MoJ), to the FCA.
