The Financial Conduct Authority (FCA) today (1 April 2019) begins regulating the claims management industry.
All claims management companies (CMCs) in England, Scotland and Wales will now have to demonstrate they meet and maintain minimum standards set by the regulator, with all new and existing CMCs having to apply for authorisation.
The FCA reported that over 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, such as ensuring its communications with consumers are clear, fair and not misleading. Alternatively, it could impose a financial penalty or refuse to authorise a firm in the event of a serious misconduct.
The new FCA regime aims to boost consumer protection and the professionalism of the sector by driving up standards in the industry. The FCA wants CMCs to be trusted providers of high quality, good value services that help consumers pursue legitimate claims for redress.
Commenting, FCA executive director of supervision – retail and authorisations, 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.”
Under the regime, CMCs will have to conduct due diligence on lead generation, provide clear and upfront information to consumers, supply customers with a summary document, inform customers of free alternatives, and record and retain customer telephone calls for a year.
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