Draft rules state CMCs would need to tell customers about free alternatives in their marketing material, as well as expanding regulations to Scotland
Claims management companies (CMCs) will need to provide for customers a full account of fees and highlight any free alternatives under new draft rules.
The FCA have today published the draft rules outlining how it will regulate claims management companies when regulation passes to the authority on 1 April 2019.
CMCs will need to highlight any free alternatives to using the CMC, such as ombudsmen schemes, in marketing material and pre-contract disclosures.
Regulations will also apply to CMCs in Scotland, where firms are currently unregulated.
Andrew Bailey, chief executive of the FCA said: “A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm.
“But the market doesn’t always work as it should and poor conduct persists across the sector.
“We want CMCs to be trusted providers of high quality, good value services that can truly help consumers.
“A key element of our approach to regulation will be ensuring that consumers are both protected and treated fairly.
“The proposals we have outlined today are integral to achieving that aim.”
Among the rules CMCs that buy so-called ‘lead lists’ from third parties will be required to carry out due diligence to ensure that the leads have been obtained legally and to keep records of this.
The FCA is also proposing that CMCs will have to record and keep all calls with customers for at least 12 months.
Other requirements include for firms to hold capital linked to the type of business they undertake and further new rules to protect any money firms hold on behalf of clients.
The FCA has also set out its approach to authorising both existing and new CMCs. Firms will need to notify their intention to register for Temporary Permission and pay the relevant fee to the FCA before 1 April 2019.
Firms will then need to go through the FCA’s authorisation process. New firms will need to decide whether to begin their authorisation process with the Claims Management Regulator or wait and submit an application to the FCA after April 2019.