The FCA has published new plans to introduce a price cap on the fees that claims management companies (CMCs) charge their customers.

The price cap would be on fees in relation to claims for financial products and services.

Some consumers currently pay fees of more than 40% of the redress they receive. However, the FCA’s proposed cap would restrict this, meaning CMCs won’t be able to charge more than 15 to 30%, depending on how much redress a consumer is due. The move could see some consumers saving several thousand pounds on the fees they pay to CMCs.

The regulator’s planned cap will apply to all claims where a consumer is awarded monetary redress, apart from PPI claims, which are already subject to a cap set by Parliament.

There is currently a PPI price cap for CMCs which is 20% of the redress paid to the consumer, but due to the period of change the PPI market is undergoing, the FCA said this 20% cap will be unaffected by its latest proposals.

As part of the new plans, the FCA will also require CMCs to disclose key information, including giving consumers more information about how the fees they pay will be calculated, and providing better signposting to the free alternative routes to redress that are available.

FCA executive director of consumers and competition, Sheldon Mills, commented: “We took over regulation of CMCs in April 2019, and have since been proactively supervising the sector. When working well, CMCs can provide useful services for consumers.

“However, consumers can experience harm when they do not understand the nature of the service CMCs provide and where they are charged excessive fees. The proposals we have announced today are designed to address this.

“We estimate that the proposed cap on fees could save consumers around £9.6m a year.”

Share Story: