The Financial Conduct Authority (FCA) will be regulating claims management companies as of April 2019. What does this mean for these businesses?
Currently, all claims management companies (CMCs) are regulated by the Claims Management Regulator. All registered companies are listed on its website, and many of these companies have their regulation number visible on their site for consumers to check.
But last year, the FCA announced that it would take over regulation of CMCs in April. All claims companies wishing to continue operating should now be applying to the FCA demonstrating how they meet a minimum set of standards.
This shakeup will affect all companies that offer any type of claim for consumers, but the FCA believes that it will be beneficial for all parties involved.
FCA Focus and Rules
In December, the financial regulator announced the new rules it wishes to impose on businesses to “boost consumer protection and professionalism.”
There are three main areas that it wishes to focus on: customers, CMCs and regulations. The FCA wants to change the reputation and reliability of claims companies.
As such, some of the key rules that the FCA intends to impose include the following:
- Companies must keep records of phone calls for up to one year
- Transparency about the fees involved before the claimant signs any agreement
- Notifying the customer about free schemes available for claiming
The FCA warns that it will take action against companies that do not follow the new rules and regulations.
Many customers have an unfavourable opinion of CMCs due to excessive cold calls and the charging of large upfront fees. However, this type of behaviour is only demonstrated by a small subset of companies. The most reputable companies are upfront, transparent and strive to offer the best service.
Companies can handle a variety of claims for customers, from flight delays to mis-sold mortgages. PPI claims have dominated television adverts for the past few years, as so many PPI policies were mis-sold. It’s believed that thousands more individuals could be eligible to make a claim.
In 2017, the FCA imposed a deadline for all consumers to submit a claim. August 29th is the final date for individuals to file a claim to their bank. The FCA hopes the deadline will encourage consumers yet to make a claim to do so, as well as put an end to the large financial mis-selling scandal.
FCA PPI Deadline: How Will It Affect Claims Companies?
Despite only being able to process claims for another seven months, PPI claims companies will still need to register with the FCA. Once registered, they will be able to handle other claims after the PPI deadline.
To date, over £33 billion has been refunded to customers for mis-sold PPI policies. But after the cut-off date on 29th August, the banks will finally be able to recover from the considerable number of refunds paid out.
As for claims companies, they are looking to process as many claims as possible before this date and help customers obtain a refund. Last year, the government imposed an interim fee cap, levelling the playing field for all companies and stating that the maximum amount each company can charge is now 20% + VAT. For many companies, this fee cap has dramatically impacted profits, making generating leads more important than ever.
All those wanting to make a claim should act soon. The new FCA regulations for claims companies shouldn’t affect those wishing to use a PPI claims company to handle their case before the FCA PPI deadline.
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