FCA lists CMC regulation proposals

CEO warns that poor conduct persists across the sector.

Claims management companies (CMCs) will need to give potential customers a summary document including examples of fees charged and an overview of services provided before any contract is agreed, under new proposals from the Financial Conduct Authority (FCA).

The watchdog will be taking over the regulation of CMCs on 1 April 2019 including in Scotland where they are currently unregulated.

Firms now have until April to let the FCA know of their intention to register for temporary permission and pay the fee and then have to go through the FCA’s authorisation process.

Leads
In an extensive set of proposals on how it will authorise and supervise firms the regulator noted that CMCs will need to highlight any free alternatives, such as ombudsmen schemes, in their marketing material and pre-contract disclosures.

CMCs that buy lists of leads from third parties will be required to carry out due diligence to make sure 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.

In addition there will be 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.

Poor conduct
Andrew Bailey, chief executive of the FCA said that a well-functioning claims management sector can help to provide justice and redress to people who have suffered harm.

However he stated that the market does not always work as it should and in his view poor conduct persists across the sector.

He concluded: “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.”

For all the latest industry news direct to your inbox, sign up for our daily newsletter.