The Financial Guidance and Claims Bill completed its passage through Parliament on May 10 2018. This means that the new Financial Guidance and Claims Act 2018 passed into law on the same date.
The new Act provides for:
- The transfer of claims management regulation from the existing Claims Management Regulator at the Ministry of Justice to the Financial Conduct Authority (FCA)
- The Financial Ombudsman Service to be given the power to adjudicate on claims management complaints, a function that is currently carried out by the Legal Ombudsman
- A new single financial guidance body to replace the Money Advice Service, The Pensions Advisory Service and Pension Wise
- New arrangements for the funding of debt advice in Scotland, Wales and Northern Ireland
- A ban on cold calling for the purposes of promoting pension plans and retirement planning
Although officially speaking the Act is now in force, the changes it will bring about have not yet occurred.
At present, it is estimated that the FCA will commence supervision of claims management companies (CMCs) in spring 2019. All UK-based CMCs, including those based in Scotland, will come under the FCA’s jurisdiction from the implementation date.
A consultation regarding how the regulatory framework will operate has already commenced. Under these proposals, issued by the Treasury in April 2018, there will be seven separate ‘permissions’ that CMCs may need to apply for when seeking FCA authorisation.
From the date of the handover of regulation, a temporary permissions regime will apply for a period of 15 months. All CMCs currently regulated by the MoJ will be eligible to register for temporary permissions, as will any CMC who will become regulated for the first time on the handover date, such as those operating in Scotland.
Any CMC that does not register for temporary permissions will have to cease trading prior to the handover date.
During their temporary permission period, each CMC will need to comply with the FCA’s rules and pay the necessary authorisation fees. Companies must then submit an application to the FCA for ‘full authorisation’. Each CMC will be given an application window during which this application must be submitted. If an application is not submitted by the appropriate deadline, then the company must cease trading.
Before the end of summer 2018, the FCA will consult on its proposed new conduct rules for CMCs. It seems likely that the eventual FCA rulebook for CMCs will incorporate most, if not all, of the recommendations of the Brady review, which include:
- A standardised disclosure document for each CMC sector to improve the quality of information provided to clients
- Signposting of alternative claims resolution channels
- A requirement to record all client calls and to retain these for 12 months following the conclusion of a contract
Significant restrictions on the way in which CMCs can promote their services can also be expected under the FCA regime.
Under the FCA regime, senior management of CMCs will also need to get used to the idea of personal accountability. As well as authorising firms to operate within financial services, the FCA authorises key individuals at each authorised firm. This means that CMC directors and management will need to satisfy their new regulator that they are ‘fit and proper’ to carry out their roles. An FCA fit and proper assessment encompasses: honesty, integrity and reputation; competence and capability; and financial soundness.
The creation of the as yet unnamed single financial guidance body is not expected to occur until autumn 2018 at the earliest. The new organisation will have five key aims:
- Providing guidance on retirement planning, including issues related to accessing defined contribution pension pots
- Increasing awareness of financial fraud and scams
- Providing debt advice to consumers with debt problems and issues
- Improving financial capability in general amongst the UK population
- Co-ordinating non-governmental financial education programmes for children and young people
The ban on firms engaging in unsolicited direct marketing in connection with pensions could be in force as early as June of this year.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article