The Financial Conduct Authority (FCA) has issued a Consultation Paper on its plans for charging fees to claims management companies (CMCs) once it assumes responsibility for regulating that sector on April 1 2019.
Firstly, the FCA is proposing that CMCs with annual turnover of up to £1 million pay an application fee of £1,200, while those with turnover of more than this amount pay £10,000. The application fee is paid when a firm submits its application to be authorised by the FCA.
Firms that are already authorised by the FCA but who also wish to carry out claims management activity after April 2019 will need to apply for a variation of permission. For any firm applying for such a variation, the application fee will be reduced by 50%.
When it comes to annual periodic fees, it is proposed that all CMCs will be placed in the same fee block. Firms with turnover of up to £100,000 will pay periodic annual fees of £1,000. CMCs with turnover above this level will pay an initial £1,000 plus an additional rate of £13 per £1,000 on the balance of their income. (This figure of £13 is considered to be a ‘variable rate’ and could change in future years). This means that a company with turnover of £200,000 will pay the initial £1,000 plus an additional £1,300; and one with turnover of £1 million will pay the initial £1,000 plus an additional £11,700.
Unlike the existing CMC regulatory regime, there will be no overall cap on the amount a firm could be asked to pay in fees.
CMCs will be required to pay their full periodic fee for the 2019/20 financial year after they register for temporary permission. Companies can register for temporary permissions to allow them to continue trading after April 1, before they then need to submit an application for full FCA authorisation at a later time.
For the time being, the FCA proposes to keep the existing Ministry of Justice regulatory requirement that firms use November 30 as the ‘year-end’ date when determining annual turnover, rather than allowing firms to set their own year-end date.
CMCs will also need to pay levies to fund the Financial Ombudsman Service (FOS), as after April 1 customers will be able to refer claims management complaints to that organisation. The exact level of the general levy CMCs will pay is yet to be confirmed, but it is anticipated that they will pay between £2.70 and £4.50 per £1,000 of annual income, subject to a minimum fee of £50.
It is also anticipated that claims companies will be subject to the existing FOS case fees system, whereby firms pay £550 per case once they have exhausted their 25 ‘free cases’ in a financial year. This means that only CMCs that have 26 or more complaints referred to the FOS in any given year would pay any case fees. More information will be provided in the FOS’s Plan and Budget, to be published in March 2019.
Responses to the consultation should be submitted to the FCA by October 22 2018.
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