The FCA has announced new plans to stop the practice of ‘claims management phoenixing’.
The regulator intends to ban Claims Management Companies (CMCs) from managing Financial Services Compensation Scheme (FSCS) claims where they have a relevant connection to the claim.
Claims management phoenixing occurs when individuals from financial services firms go out of business but later reappear in connection with CMCs, and then charge consumers for seeking compensation against their former firm’s poor conduct by bringing claims to the FSCS.
CMCs exist to help customers make claims for compensation when they have suffered loss or damage. In the financial services industry, these claims relate to losses caused by financial services firms.
By stopping CMCs from managing FSCS claims with which they have a relevant connection, the FCA suggested the move will ensure CMCs are not seeking to profit from past misconduct of individuals connected with the CMC.
FCA executive director of consumers and competition, Sheldon Mills, said: “Consumers should be able to choose to use a CMC to help them claim compensation from the FSCS.
“But paying someone to provide help who is connected with the firm that caused the consumer’s loss is wrong, particularly where the firm had a responsibility before winding up to help its customers to obtain compensation.
“Our proposals are designed to put an end to this practice and to increase consumer trust and confidence in financial services firms, CMCs and the redress system.”
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