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FCA confirms new rules for CMCs to boost consumer protection

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  • 17/12/2018
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FCA confirms new rules for CMCs to boost consumer protection
All claims management companies (CMCs) from April 2019 will be subject to a series of changes aimed at boosting consumer protection from the Financial Conduct Authority (FCA).

 

Changes include pre-contract disclosures requirements where CMCs must clarify whether their fee is based on the gross or net amount of the compensation award.

CMCs must also ask the customer if they know of other methods to pursue their claim.

In addition, all firms have to record and retain customer telephone calls for a year after their final contact with a customer.

There has also been a reduction in the amount of information CMCs need to set out on the services they will provide in the one-page summary document.

The regulator confirmed that all CMCs from April 2019 will have to be authorised by the FCA to continue operating legally. Any firm that is not authorised will have to stop handling claims.

To be authorised by the FCA, the businesses will have to demonstrate they meet minimum standards to operate.

 

Temporary permission

From January CMCs can apply for a temporary permission to operate.

This will allow them to continue operating until they are fully FCA-authorised during one of two waves running from April until the end of July.

The FCA said it aims to ensure that CMCs are trusted providers of high quality, good value services to help customers pursue legitimate claims for redress, and benefit the public interest.

Jonathan Davidson, executive director of supervision, retail and authorisations at the FCA (pictured), 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.

He added: “The new rules will ensure firms are transparent about their estimated fees before the customer signs on the dotted line, and notify customers of free statutory ombudsmen or compensation schemes.

“It is vital that customers have the information they need to make informed decisions. We will take action against those that break the rules.”

It comes after the FCA revealed plans in September to extend its senior manager and certification regime to all CMCs.

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