The UK’s Financial Conduct Authority (FCA) has set out plans for regulation of claims management companies (CMCs).
The draft rules outline how the financial regulatory body will regulate CMCs when regulation passes to the FCA on 1 April 2019.
After a review of CMC regulation commissioned in 2015, the UK Government said that the regulation of CMCs would be taken up by the FCA.
The FCA said the regulation will expand to Scotland, where companies are not regulated at present.
The new regulations propose on how the FCA will authorise and supervise firms and steps that it will take if CMCs breach its rules.
As per the FCA’s proposals, CMCs will be required to provide a potential customer with a short summary document containing important information including illustration of fees charged and an overview of the services the CMC will provide. This document will need to be provided before any contract is agreed.
The CMCs will also need to highlight any free alternative to using CMC including ombudsmen schemes, in marketing material and other pre-contract disclosures.
Claims managers that will buy ‘lead lists’ from third parties will need to carry out due diligence to make sure that the leads have were obtained legally and to keep records of this.
The FCA has also proposed that CMCs will have to record and keep all calls with customers for at least 12 months.
FCA’s other requirements include holding capital linked to the type of business that they undertake and to further new requirements to protect any money that the firms hold on behalf of their clients.
FCA CEO Andrew Bailey said:“A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm. But the market doesn’t always work as it should and poor conduct persists across the sector.
“We want CMCs to be trusted providers of high quality, good value services that can truly help consumers. A key element of our approach to regulation will be ensuring that consumers are both protected and treated fairly. The proposals we have outlined today are integral to achieving that aim.”