The UK’s Financial Conduct Authority (FCA) has begun regulating the claims management industry across England, Wales and Scotland.
All claims management companies (CMCs) will now need to demonstrate they meet and maintain minimum standards outlined by the FCA. Both existing and new CMCs will need to apply for FCA authorisation.
There have been over 900 CMCs to apply for temporary permission to continue their operations while they go through the FCA authorisation process.
When authorised, the FCA has a range of powers it can leverage if a company fails to meet compliance. These include requiring a firm to change its business practices, (such as ensuring communications with consumers are clear), imposing financial penalties or refusing to authorise a firm.
The FCA aims to bolster consumer protections and the professionalism within the sector by increasing its standards. Its end-goal is to make CMCs become trusted providers and consumers pursue legitimate claims for redress.
New FCA requirements include: due diligence on lead generation and rules preventing firms encouraging customers to make fraudulent, false, frivolous or vexatious claims; providing clear, upfront information to customers around fees; and giving customers a summary document on services they will provide, before the customer signs a contract.
Firms now must also tell customers about free alternatives such as the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS), including in advertising.
Finally, firms need to record and retain customer telephone calls for a year after their final contact with the customer. This is aimed at lowering high-pressure sales techniques and support strong resolution of customer complaints.
FCA executive director of supervision Jonathan Davidson 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.”
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