The Government has confirmed it intends to bring claims management companies (CMCs) under the Financial Conduct Authority (FCA)’s remit. This follows an independent review of the regulatory system for CMCs, although the review did not explicitly recommend this move.
The announcement means that CMCs can inevitably expect tougher regulation once the switchover has occurred, although at present there is no indication of when this will occur.
Financial services firms who are regulated by the FCA are required to comply with an extensive rulebook, are required to submit comprehensive data returns and are subject to a structured monitoring programme. The FCA can also impose bans and fines not only on authorised firms that break the rules, but also on key individuals within firms. For example, in the first half of March 2016 alone, five individuals have been prohibited by the FCA.
The announcement was made as part of the Government’s Budget measures. A Treasury statement referred to the FCA’s policy of holding senior management accountable by saying:
“The Government is clamping down on the rogue claims management companies that provide bad service and bombard customers with nuisance calls.
“The new regime will be tougher and will ensure claims management company managers can be held personally accountable for the actions of their businesses.”
Huw Evans, director general of the trade association the Association of British Insurers, commented:
“For too long the regulation of claims management companies has not been fit-for-purpose, leaving the public at the mercy of unscrupulous firms who make nuisance phone calls and encourage frivolous and fraudulent claims.
“It should go a long way to driving the cowboy operators out of town and helping to ensure honest customers don’t end up footing the bill for their dodgy practices.”
In a statement, the FCA said:
“There has been a lot of work done by the [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Claims Management Regulator (CMR)] to drive up standards and it is important that this continues in the interim period. We will work closely with the government and the CMR to ensure that there is a smooth handover of regulation to us.”
The Government had already announced in February 2016 a series of restrictions on the fees CMCs can charge. The proposals include limiting fees to 25% of the compensation and at £300 for all claims worth more than £2,000. Taking fees before the CMC has done any work, and taking an upfront fee where the lead is referred to another company would also be banned.
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