The Financial Conduct Authority (FCA) and the Competition and Markets Authority (CMA) will work together to ensure effective competition for consumers using claim management companies.
This week, the co-operation agreement between the two regulators was updated ‘to reflect the FCA’s new concurrent competition jurisdiction in relation to the provision of claims management services in Great Britain’.
The FCA and claims management regulation
The FCA took over regulation of claims management firms (businesses that help consumers seek compensation from finance companies) on 1 April this year.
The new requirements for claims management companies (CMCs) under FCA authorisation include:
- Due diligence on lead generation and rules to prevent firms encouraging customers to make fraudulent, frivolous or vexatious claims or claims which have no good basis
- Providing clear, upfront information to customers about the fees they charge and the services they will provide
- Giving customers a summary document about the services they will provide before the customer signs a contract
- Telling customers about free alternatives such as the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS), including in advertising
- Recording and retaining customer telephone calls for a year after their final contact with a customer will reduce the chances of high-pressure sales techniques and support robust resolution of customer complaints
Falling under the remit of the FCA means that CMCs now need to comply with all the Authority’s regulations, including the extension of the Senior Managers and Certification Regime that comes into force in December.
Tackling unethical practices
In June, the financial regulator sent a ‘Dear CEO’ letter to claims management firms, reminding them of their obligations under FCA regulation and flagging a number of areas where the regulator has found practices falling short of its standards.
It’s not the first time the two regulators (FCA and CMA) have supported each other’s efforts either – we reported in June that the two were working together on the ‘super complaint’ launched by Citizen’s Advice on unfair treatment of loyal customers.
In the updated ‘memorandum of understanding’, the FCA and CMA said they would work together to investigate cases of suspected anti-competitive behaviour by CMCs.
The FCA also requires firms that obtain lead lists from third parties to carry out due diligence on whether this data has been obtained legally and keep records of this. This fits with broader regulation on data management, like the GDPR.
How CMCs can live up to the FCA’s requirements
If you’re a CMC looking to ensure you meet the requirements of the FCA and CMA, what steps should you be taking?
- If the world of regulated marketing is new to you, you need to understand what constitutes a financial promotion.
- Build a governance-oriented culture that supports your efforts to comply with FCA requirements.
- Get your communications in shape. The FCA has specific rules about Treating Customers Fairly which will be relevant to CMCs.
- Make sure your marketing and customer communications are ‘fair, clear and not misleading’.
- Pay particular attention to your communications with customers who may be vulnerable – an area of focus for the financial regulator.
- Getting Compliance team approval for financial promotions is something newly-regulated firms have to get to grips with.
- Make sure regulatory compliance is mandated in your processes.
Get to grips with regulatory compliance
FCA compliance can be complicated, particularly if you’re new to the world of regulated marketing.
LS Consultancy has wealth of experience in reviewing financial promotions and can do so on a one-off or on an on-going basis.
We are also skilled in reviewing and assessing your financial promotion procedures and can assist you to establish the necessary framework to help future compliance with regulatory requirements.
To help CMC firms understand and meet the regulator’s requirements, we offer a complete solution with a range of cost effective, regulatory compliance and marketing products and solutions including copy advice that are uniquely suited to supporting firms.