The Financial Conduct Authority (FCA) has today published draft rules outlining how it will regulate claims management companies (CMCs) when regulation passes to the FCA on 1 April 2019.
Following a review of CMC regulation commissioned in 2015, the Government announced that the FCA would take over regulation of CMCs. Regulation will extend to Scotland, where firms are currently unregulated. The FCA has today set out how it proposes to authorise and supervise firms and the steps it will take should CMCs breach FCA rules.

Andrew Bailey, Chief Executive of the FCA 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.”

The FCA’s proposals will require CMCs to provide a potential customer with a short summary document containing important information such as an 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. CMCs will also need to highlight any free alternatives to using the CMC, such as ombudsmen schemes, in marketing material and pre-contract disclosures. CMCs that buy so-called ‘lead lists’ from third parties will be required to carry out due diligence to ensure that the leads have been obtained legally and to keep records of this. The FCA is also proposing that CMCs will have to record and keep all calls with customers for at least 12 months.

Source: