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FCA: The New Regulator for Claims Management Companies
15th April 2019
FCA: the New Regulator for Claims Management Companies
The start of this month saw the FCA take over the regulation of over 900 claim management companies as the industry’s new regulator.
Effective from the 1st April 2019, the Financial Conduct Authority will regulate the claims management industry in England, Scotland and Wales in an effort to “drive up standards” across the sector as well as strengthen consumer protection.
Prior to April, the Claims Management Regulator (part of the Ministry of Justice) was responsible for regulating the industry, but further to an independent review undertaken in 2016, the decision was made to transfer this responsibility to the FCA.
All current Claims Management Companies (as well as any new ones) will need to apply for authorisation with the FCA. So far, the FCA have confirmed that more than 900 companies have applied for temporary permission to continue trading until the process has been completed.
In addition to the change in regulatory body, a new service run by the Financial Ombudsman Service – the Claims Management Ombudsman – will now take on the responsibility for resolving complaints about companies in this sector. Previously it had been the Legal Ombudsman that was responsible for this.
A number of new requirements have been introduced by the FCA including rules that prevent claims management firms from encouraging customers to make "fraudulent, frivolous or vexatious claims or claims which have no good basis". The FCA will also require these firms to provide clear and upfront information to customers about fees and services, including a summary document before the customer signs a contract.
Should claims management companies not comply with the new regulatory requirements set forth by the FCA, then they will use a range of powers including penalties and refusing to authorise a company in case of serious misconduct.
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