The Financial Conduct Authority (FCA) has taken issue with the way some claims management companies (CMCs) advertise their services, saying that they must do more to ensure their promotions do not mislead potential customers.
Since taking over the regulation of CMCs in April, the FCA has reviewed over 200 ads in various media and found widespread instances of poor practice and misleading promotions. In response, the regulator has introduced several new rules in relation to financial promotions to ensure that CMCs provide information to consumers that is fair, clear, and not misleading.
These rules require CMC firms to identify themselves as a claims management company; prominently state if a claim can be made to a statutory ombudsman/compensation scheme without using a CMC and without incurring a fee; and to include prominent information relating to fees and termination fees which customers may have to pay if a firm uses the terms similar in meaning to “no win, no fee.”
Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said that the regulator will take a CMC’s compliance with the rules into account when considering applications for full authorisation.
“Many CMCs play a significant role in helping consumers to secure compensation,” he said. “But CMCs using misleading, unclear, and unfair advertising practices to get business is completely unacceptable. We won’t hesitate to take action where we consider that customers are being misled or otherwise treated unfairly by poor advertising.”
Martin Milliner, claims director at LV= General Insurance, has welcomed the FCA’s toughened stance on misleading promotions.
“It’s good to see the FCA clamping down on claims management companies,” he said. “For too long, there have been some who have got away with unscrupulous activities and we’ve even seen some customers left high and dry on the court steps by the company that’s meant to be representing them after they realise the case will be lost and they won’t get any money, leaving customers with hefty legal fees. With the FCA intervening, customers will no longer be misled and we should hopefully see an end to these sorts of unfair practices.”
