The Financial Conduct Authority (FCA) has today announced proposals on how it will authorise and supervise claims management companies (CMCs) when regulation passes on 1st April 2019.
The FCA’s proposals will require CMCs to provide a potential customer with a short summary document containing an illustration of fees charged and an overview of services to be provided. This document will need to be provided before any contract is agreed.
CMCs will also need to highlight any free alternatives to using the CMC, such as ombudsmen schemes, in marketing material and pre-contract disclosures.
CMCs that buy ‘lead lists’ from third parties will be required to carry out due diligence to ensure 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.
Andrew Bailey, Chief Executive of the FCA said:
“A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm. But the market doesn’t always work as it should and poor conduct persists across the sector.
“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.”
The FCA has also set out its approach to authorising both existing and new CMCs. Existing firms will need to go through the FCA’s authorisation process. New firms will need to decide whether to begin their authorisation process with the current Claims Management Regulator or wait and submit an application to the FCA after April 2019.
In terms of breaching the rules, the FCA intends to use fining and suspension powers to achieve ‘credible deterrence’ and show there are ‘meaningful consequences’.
This is likely to be welcome news to SRA regulated law firms as it helps to level the playing field and imposes equivalent restrictions on CMCs.