The FCA says the regime “aims to boost consumer protection and the professionalism of the sector by driving up standards in the industry”
The FCA has finally taken over the regulation of claims management companies (CMCs), vowing to protect customers from cowboy claims farmers.
Already, there are more than 900 signed up for temporary permissions to carry on trading while they seek full authorisation.
The regulator has previously said that it wants CMCs to be seen as “professional providers of quality service,” and that it has taken on a robust approach to regulating a section of the market that has been seen as having a dark side.
The new FCA requirements 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
Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said: ”Today brings a new regime and rules for regulating the claims management industry.
“Many CMCs play an important role in helping to secure compensation for customers, including for those who otherwise might not make a claim. The new regime has consumer protection and CMC professionalism at its heart. It will mean that customers will be protected from claims management cowboys and get a better deal.’
Barbara Kubis-Labiak, technical specialist at the FCA, attended the Insurance Times Fraud Charter event last month, where she delved deeper into the measures taken to regulate CMCs.
She told the group that all measures previously announced in the consultation paper were being brought forward and will come into enforcement on 1 April.
She also said that the FCA are going to do all they can to “empower the consumer” and encourage them to claim by themselves, rather than seeking aid from CMCs.
Read more about what Kubis-Labiak said in the Fraud Charter roundup in the April issue of Insurance Times, out this week.
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