After a review in 2015 of Claims Management Companies (CMCs) regulation commissions, there was an announcement from the government to say that the Financial Conduct Authority (FCA) would be taking over all regulations for claims management companies as of April 2019.
Unlike previous years, these regulations will extend into Scotland. No claims management company in Scotland have ever been regulated and the FCA have been notifying CMCs how they propose to supervise companies and what steps they are willing to take if any CMCs are not willing to comply with FCA rules.
As per the FCA they are wanting a “well functioning claims management sector”. One main element of their approach regarding to regulation will be to ensure that customers details are protected as well as being treated fairly. The claims management sector need to be able to help provide justice for their clients as well as a provide a high quality and trusting service.
Before a customer decides they want to use a certain claims management company the FCA have decided that a CMC will need to provide the consumer with a document with a short summary which contains an overview of their services, and fees that may be charged, including any alternative such as ombudsmen schemes, and all important information.
One main Rule that CMCs will have to follow undergoing the FCA, will be to ensure that any lead generation created by themselves or third parties are to be kept records of. Any calls made by the company and their customers will have to be recorded and kept on file for at least 12 months.
Depending on the type of business undertaken by the client, the claims management companies will have to hold any capital linked on behalf of the clients.
All firms will have to request temporary permissions for the FCA to approve before April 2019. They will not just be approaching old companies, but also new companies who have started or are looking to start up. All C;Cs will have to go through the FCA authorisation process to be able to get regulated. If there is anything about a firm that the FCA is suspicious of they can and will stop them from working in certain sectors, doing certain things and dealing with certain clients.
The FCA have set out strategic decisions that they will take and the reasons they want to do them. One decision that has been made is that the Financial Conduct Authority want to make sure that things are transparent in the way that they do them, how they regulate and how they target to deliver good outcomes.
Their steps include:
Their approach to supervision – The FCA need a thorough understanding of all business models and will be taking precise and efficient action if any harm is identified.
Their approach to enforcement – This role is there to make sure fair and justified outcomes are made and the rules are obeyed. The FCA will be identifying all CMCs behaviour and anything that may be dishonest, unlawful and failing to meet the FCA standards. If these things have been seen in firms, the FCA can then decide if enforcement needs taking.
Their approach to consumers – The FCA aim to address all concerns that are raised. There are many tools that are used to protect consumers and their information as well as try to achieve the greatest impact for them.
Their approach to competition – The FCA’s approach to competition provides full details of how they wish to advance themselves and their objectives. With this the FCA can outline and diagnose potential misuse in the industry.
Their approach to authorisation – The FCA are to ensure that both customers and companies who are applying for authorisation, or who have been approved understand how they will have to comply with the regulations. Under the current regulation system there is a permission for regulated CMCs across six different sectors:
- Personal Injury
- Criminal Injury
- Financial services & products
- Housing disrepair
- Specified benefits
All claims management companies will really see one main change during the transition being, seven separate permissions in total.
There will be one permission for each of the six sector above and irrespective of the claims management sector, there will be a permission solely for lead generation. These include advising claimants, investigating a claim and representing a claimant.
All firms will have to be registered for their temporary permissions by March 31st. All CMCs who have already been authorised for a long time will have to register as well as new CMCs entering regulation. Once firms have been given temporary permission they will then need to apply for full authorisation.