The Financial Conduct Authority (FCA) has begun regulating the claims management industry today.
All claims management companies (CMCs) in England, Scotland and Wales will now have to demonstrate they meet and maintain minimum standards set by the FCA.
All existing and new CMCs will need to apply to the FCA for authorisation.
More than 900 CMCs have registered for ‘temporary permission’ to continue operating while they go through the FCA authorisation process.
Once authorised, the FCA has a range of tools and powers it can use if firms do not comply with the rules. This may involve requiring a firm to change its business practices (eg ensuring its communications with consumers are clear, fair and not misleading), imposing a financial penalty or refusing to authorise a firm if there is serious misconduct.
The new FCA requirements include:
- due diligence on lead generation and rules to prevent firms encouraging customers to make fraudulent, frivolous or vexatious claims or claims which have no good basis
- providing clear, upfront information to customers about the fees they charge and the services they will provide
- giving customers a summary document about the services they will provide before the customer signs a contract
- telling customers about free alternatives such as the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS), including in advertising
- recording and retaining customer telephone calls for a year after their final contact with a customer will reduce the chances of high pressure sales techniques and support robust resolution of customer complaints
Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said: “Today brings a new regime and rules for regulating the claims management industry. Many CMCs play an important role in helping to secure compensation for customers, including for those who otherwise might not make a claim.
“The new regime has consumer protection and CMC professionalism at its heart. It will mean that customers will be protected from claims management cowboys and get a better deal.”