On 1 April 2019, the Financial Conduct Authority (FCA) takes over regulation of the UK’s claims management industry. In preparation for this, the regulator recently published new rules for the sector intended to ‘boost consumer protection and professionalism’.
The Policy Statement, released at the end of last year, sets out the conduct, rules and fees the FCA will apply to claims management companies from April 2019.
Here we take a look at what the new rules say, and what you need to do to comply.
The FCA’s regulation of the claims management sector
On 2 January 2019, the temporary permission window opened. Registering for temporary permission will allow claims management companies (CMCs) to continue operating legally until they are fully FCA-authorised.
If you haven’t already done so, you need to register by the end of March. Any firm that fails to register with the regulator before then will not be able to continue operating. The FCA warns firms not to leave registration until the last minute to ‘avoid potential problems or delays’.
To achieve FCA authorisation and continue to operate, CMCs must demonstrate that they meet minimum standards. Any firm that isn’t authorised will have to stop handling claims.
What do the new rules say?
The rules aim – in the words of the FCA – to ‘ensure that CMCs are trusted providers of high quality, good value services that help customers pursue legitimate claims for redress, and benefit the public interest’.
They focus on three main areas:
- Customers – wanting customers to be empowered and confident in choosing a value-for-money service which is appropriate for their needs.
- CMCs – wanting CMCs to help customers get redress in a way that complies with FCA rules and requiring them to meet a common set of standards.
- Regulatory – regulating in a way that prioritises high standards of conduct, protects consumers and improves public confidence in claims management services.
Publishing the new statement, Jonathan Davidson of the FCA, said that: ‘The new regime aims to drive up standards in a sector whose reputation has been tarnished by some companies engaging in high pressure selling and by failing to provide clear information on the fees they charge.’
The new rules will ensure that:
- Firms are transparent about estimated fees before the customer signs up
- They notify customers of any free statutory ombudsmen or compensation schemes that could be used instead of a commercial CMC.
All claims management firms will also now need to record and retain customer telephone calls for a year after their final contact with a customer.
We’re a CMC – how can we get ready for regulation?
This blog on how claims management firms can prepare for FCA regulation has practical tips for firms wishing to get up to speed with the regulator’s requirements.
With six weeks to go, if you feel unprepared, focus your efforts on some key areas:
- Make sure you have registered for temporary permission to operate.
- Get a step ahead by ensuring you have a governance-oriented culture. If strong ethics are an in-built part of your business, you will be in a good position to meet FCA standards.
- Look at your communications. The FCA has strict rules on Treating Customers Fairly, which regulated firms need to ensure their financial promotions and other client communications follow.
- Make sure your marketing and customer communications also meet the regulator’s requirements around being ‘fair, clear and not misleading’.
- If you are new to FCA regulation, and unsure what constitutes a financial promotion feel free to get in touch with us.
- Make regulatory compliance non-negotiable.
Embed a compliance culture across your firm
FCA regulation can seem a daunting prospect – but start with the steps above and you can focus your attentions on some of the issues that typically fall under the regulator’s microscope.
If you want more advice on ensuring you run a business where compliance becomes second nature, we offer a complete solution with a range of cost effective services that are uniquely suited to supporting firms.