Claims management firms have grabbed headlines for plenty of the wrong reasons in recent years – but now the Financial Conduct Authority (FCA) is looking to put them on a smoother regulatory path.
The regulator has published draft rules today outlining how claims management companies (CMCs) will be monitored when it takes over regulation on April 01, 2019. The move came on the back of a review of CMC regulation back in 2015 and will see regulation also extend to Scotland – where firms are currently unregulated.
“A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm,” said Andrew Bailey, chief executive of the FCA. “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.”
Among the proposals outlined by the FCA are that CMCs provide potential customers with a short document containing important information – such as fees charged and an overview of the services it will provide. This should be provided before any contract is agreed.
In addition, CMCs will also need to highlight free alternatives – including ombudsman schemes – in their marketing material; and those that buy “lead lists” from third parties will have to undertake due diligence to ensure these lists are obtained legally. It has also been proposed that calls with customers be kept on record for at least 12 months.
Furthermore, it will become a requirement for firms to hold capital linked to the type of business they undertake and protect money they hold on behalf of clients.
Existing firms will need to notify their intention for temporary permission and pay the relevant fee to the FCA before April 01, 2019, while new firms should decide whether to begin their authorisation with the Claims Management Regulator or wait to authorise with the FCA on April 01 next year.
