Greater Protection for Consumers as Claims Management Companies Come Under FCA Regulation

Regulation of Claims Management Companies has, from 1st April 2019, been transferred from the Claims Management Regulator to the Financial Conduct Authority (FCA).

Claims management companies in England, Scotland or Wales will now have to apply to the FCA for authorisation and adhere to a new set of industry rules.

Claims management companies charge to handle consumer compensation claims, including personal injury, mis-sold financial products and section 75 credit refunds. Under the new rules, consumers can now complain to the Financial Ombudsman Service if they are dissatisfied with the service or conduct of CMCs.

The decision to transfer regulation to the FCA follows an independent review of the claims management industry in 2015, commissioned by the government. The report, published in 2016, included recommendations to pass industry regulation to the FCA.

This requires CMCs to meet new regulations which include ‘due diligence on lead generation and rules to prevent firms encouraging customers to make fraudulent, frivolous or vexatious claims or claims which have no good basis’. They are also obliged to check that customers’ details have been obtained legally, keep records of all customer calls, inform customers about free alternatives, be upfront with consumers about key information before entering into a contract and keep customers updated about the progress of any claim.
Prohibited practices include high pressure selling, unclear fee information and harassing consumers who have not consented to receiving emails, texts and calls.

The regulations also cap the amount a CMC can charge consumers for a PPI claim at 20 per cent plus VAT.

Companies found to have breached the FCA rules are to be fined or denied authorisation. Unauthorised firms are not legally able to handle claims.

How to complain about a CMC

Complaints about a CMC should first be directed to the company itself. Where the issue cannot be resolved satisfactorily, or no response is received from the CMC within eight weeks, consumers can escalate the matter to the Claims Management Ombudsman.
Complaints about CMCs made prior to 1st April 2019 to the Legal Ombudsman will be transferred across.

Greater Protection for Consumers as Claims Management Companies Come Under FCA Regulation 2
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