FCA plans for claims management companies regulation
On 1 April 2019 the Financial Conduct Authority (the FCA) will become the regulator of claims management companies (CMCs). The FCA has today published a consultation paper outlining how it proposes to regulate CMCs.
Since 2007, the Government has become increasingly concerned about misconduct in the CMC Sector. Following a review of CMC regulation in 2015, the Government announced that the FCA would take over regulation of CMCs. Regulation will pass on 1 April 2019. At the same time, the Financial Ombudsman Service (the FOS) will become responsible for resolving disputes about CMCs.
The Consultation Paper sets out the draft rules and guidance the FCA propose to make in relation to CMCs.
10 key points to note
- Many of the existing Claims Management Regulator's rules will be carried across but there will be amendments where appropriate. The FCA proposes to supplement these rules by applying new standards to CMCs in a number of areas.
- CMCs will be required to give more information to customers before any contract is agreed. This will include an indication of fees, an overview of the services and the free alternatives to using a CMC (including the FOS).
- CMCs will be required to review their marketing material to ensure this is clear. Where CMCs advertise a 'no-win, no-fee' or similar service, the advert will need to have a clear indication of fees that the CMC will charge or how they would be calculated.
- The Government’s proposed policy intention is that claims made under section 75 of the Consumer Credit Act 1974 will be bought into the scope of these new proposed rules/guidance.
- In terms of information gathering, CMCs will be required to check that information obtained from third parties was obtained legally and to keep records of this. The FCA is also proposing that CMCs will have to record and keep all calls with customers for at least 12 months.
- The FCA plan to apply the new Senior Managers and Certification Regime to CMCs and will consult on this in a separate consultation paper in Autumn 2018.
- The new proposals will be contained in a separate section of the FCA’s Handbook called the ‘Claims Management: Conduct of Business sourcebook’ (CMCOB). However the FCA also proposes to apply the rules which generally apply to all the firms they regulate, such as their Principles for Business.
- CMCs will be subject to the FCA rules on complaints handling and guidance in DISP. The FOS will therefore deal with complaints about CMCs under its compulsory jurisdiction.
- There is intended to be a new approach to authorisation for both existing and new CMCs.
- The majority of the new rules and standards will apply from 1 April 2019 although there will be some requirements that apply from a later date.
The FCA says they "want CMCs to be trusted providers of high quality, good value services that help customers pursue legitimate claims for redress, and benefit the public interest". The increased regulation, supervision and control over fees is a positive step for consumers and firms. The FCA is asking for feedback on the proposals by 3 August 2018.
For more information contact Richard Hayllar Warren Clark or Alanna Tregear
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