The Financial Conduct Authority (FCA) today published new rules and fees that will apply to all 1200 claims management companies (CMCs) from April 2019. That’s when the FCA takes over responsibility for regulation.
From next April, all CMCs 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 isn’t authorised will have to stop handling claims.
In PS18/23: 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’re 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. It’s 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 firms must 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. That’s 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.