With some consumers paying fees of more than 40 per cent of the redress they receive, the consultation paper out today proposes a 15 – 30 per cent cap, saving customers thousands of pounds.
The cap will apply to all claims if a consumer is awarded monetary redress, apart from Payment Protection Insurance (PPI) claims which are already capped by Parliament at 20 per cent.
The regulator proposes CMCs will be required to disclose key information, such as giving consumers more background about how the fees they pay will be calculated and better signposting to the free alternative routes to redress available.
This information must be disclosed to consumers before they enter into a contract, to help consumers make better-informed decisions about using CMC services.
Sheldon Mills, executive director of consumers and competition at the FCA, which started regulating the sector in 2019, said: “When working well, CMCs can provide useful services for consumers. However, consumers can experience harm when they do not understand the nature of the service CMCs provide and where they are charged excessive fees. The proposals we have announced today are designed to address this.
“We estimate that the proposed cap on fees could save consumers around £9.6m a year.”
Apart from PPI, the vast majority of financial services and products claims currently being managed by CMCs target packaged bank accounts, loans, savings and investments, and pensions.
The consultation is open until 21 April 2021 with the policy statement expected in the Autumn 2021.