Following a review of CMC regulation commissioned in 2015, the Government announced that the FCA would take over regulation of CMCs. Regulation will extend to Scotland, where firms are currently unregulated. The FCA has today set out how it proposes to authorise and supervise firms and the steps it will take should CMCs breach FCA rules.
Andrew Bailey, Chief Executive of the FCA said:
“A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm. But the market doesn’t always work as it should and poor conduct persists across the sector.
“We want CMCs to be trusted providers of high quality, good value services that can truly help consumers. A key element of our approach to regulation will be ensuring that consumers are both protected and treated fairly. The proposals we have outlined today are integral to achieving that aim.”
The FCA’s proposals will require CMCs to provide a potential customer with a short summary document containing important information such as an illustration of fees charged and an overview of the services the CMC will provide. This document will need to be provided before any contract is agreed.
CMCs will also need to highlight any free alternatives to using the CMC, such as ombudsmen schemes, in marketing material and pre-contract disclosures.
CMCs that buy so-called ‘lead lists’ from third parties will be required to carry out due diligence to ensure that the leads have been 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.
Other requirements on firms will include a requirement for firms to hold capital linked to the type of business they undertake and further new requirements to protect any money firms hold on behalf of clients.
The FCA has also set out its approach to authorising both existing and new CMCs. Firms will need to notify their intention to register for Temporary Permission and pay the relevant fee to the FCA before 1 April 2019. Firms will then need to go through the FCA’s authorisation process. New firms will need to decide whether to begin their authorisation process with the Claims Management Regulator or wait and submit an application to the FCA after April 2019.
Notes to editors
- CP18/15: Claims management
- Review of CMC regulation
- The Financial Guidance and Claims Act 2018 enables the transfer of regulation of CMCs to the FCA from the existing Claims Management Regulator, and extends regulation to Scotland. The Government recently consulted on the implementing legislation, which has not yet been approved by Parliament.
- On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.