In June of 2016 the government announced how the FCA (Financial Conduct Authority) would be regulating CMCs (claims management companies) from April of 2019.
The FCA have explained how they propose to supervise firms with authority, so CMCs can follow all the steps to be able to reach the FCA’s regulations. With the FCA taking over, there will be a new approach for any claim’s management company, being able to centre their attention on managing and advancing consumer protection. According to the FCA, the goal is for the CMC’s to be trusted by consumers and provide good, high quality services where clients will feel comfortable in perusing their claims.
When following the rules and regulations formed by the FCA, CMC’s will be required to provide their customers with documents that contain essential information including an overview of any fees that will be charged to them, including alternative fees such as; ombudsman services, and a review with all services provided. No contracts will be agreed until all documents have been provided and read.
Claims companies who are already approved by the MOJ (Ministry of Justice), will been granted temporary authorisation to join the FCA. They are looking at taking over around 1,700 CMCs this year alone.
There are complaints being made about CMCs which, at present claims management companies are being regulated by the Claims Management Regulator. After the FCA has taken over these complaints will be handled by them.
When the law was changed for the FCA to take over the claims management companies, it also made changes for firms who are already regulated. These would be claims management companies for instance who are located in Scotland, as this is the first time they would have been monitored. Companies who only handle claims with section 75 of the Consumer Credit Act would also be entering regulation for the first time.
When entering the FCA regulations, claim companies will be able to get temporary permission through the FCA’s application system which will have to be done before March 31st, 2019. This will allow companies to carry on trading using their CMC permissions while their permissions are being authorised.
Claims management companies will have to apply and once they have, they will be allocated two different application periods;
April through to May 2019 is for CMCs who only deal with financial products and service claims and for CMC regulation.
Application 2 will be from June through to July, for CMCs who do claims products work and lead generation as well as CMCs that operate in all other sectors.
Once the claim companies have registered for their temporary permissions, and from the 1st of April 2019, all companies will be required to comply with the FCA standards and regulations. Any companies who do not comply, will face action.
For the companies who have applied for their temporary permissions, the FCA will be able to dictate what regulated activated the firms decide to do. There are 6 sectors in which the FCA regulate and if there are any specific concerns, they may have about any claims company, they are permitted to limit the amount of work for that company. They will be able to stop them working on claims from certain sectors as well as holding client’s monies etc.
The FCA have many rules and regulations that must be followed by all CMC’s. Many of their rules are similar, and some even the same as the existing, however there are some new ones, as well as some that may have been changed. With the strict regulations one of the new rules are; CMC’s will now have to keep records of all recorded calls for at least 12 months.
There are a lot of firms out there who will not be able to abide by the rules and regulations, and once firms have been authorised by the FCA, they will be checked upon regularly to make sure all standards re being kept. This also entails visits to the companies.