Home > Knowledge > Financial Conduct Authority (FCA) consultation on regulating claims management companies (CMCs)
June, 7, 2018
The FCA has opened a consultation on the future regulation of claims management companies (CMCs), ahead of taking over responsibility for their operations on 1 April 2019. The consultation will conclude on 3 August 2018 and recognises the concern that has been expressed for some time now about misconduct in the CMC sector.
The consultation paper identifies four stages in a ‘customer journey’ where regulation is required. These are:
Advertisements: information about fees should be included, together with advice as to whether the consumer has any alternative option, such as taking their claim to an ombudsman at no cost. Where a ‘no-win-no-fee’ service is offered, the precise meaning of that offer will need to be explained.
Documentation: the provision of a one-page summary, setting out key information and details of terms and conditions which will apply if the CMC service is taken up.
Ongoing disclosure during the claims process: to keep the customer updated promptly on material developments, including an update about fees.
On resolution of the claim: the provision of a clear explanation of how a final fee has been calculated; or if the claim has not succeeded what alternative remedy may still be available.
The consultation also proposes that all telephone calls with customers should be recorded and records of calls kept for a minimum of 12 months.
Financial security for customers is also being promoted by requirements that CMCs should maintain adequate capital resources and segregate client money from their own money.
Where a CMC buys leads from a third party, there are proposals that due diligence should be carried out to ensure that the lead generator is also authorised, including being compliant with data protection regulations. This reflects the fact that such providers may be outside of the FCA’s immediate jurisdiction.
There will be a general review of the FCA rules in relation to this expanded role, including the operation of its complaints procedure which from 1 April 2019 will extend to CMCs.
We welcome these proposals which appear to address many of the areas of poor practice within CMCs which have undoubtedly affected consumers adversely.