19 Dec 2018
Claims Management Companies (CMCs) are on course to face a new regulatory regime in 2019 which could reduce costs for both lenders and consumers.
The changes follow the transfer of regulation to the Financial Conduct Authority from the existing Claims Management Regulator. The transfer is part of the Financial Guidance and Claims Act 2018.
Under the current system CMCs in England and Wales are regulated by the Claims Management Regulator, with Scottish Claims Management Companies remaining unregulated. The new system will now mean regulatory control is extended to Scottish firms after concerns had been raised that if they were not included it prove an incentive for CMCs to simply operate out of Scotland.
Existing and new firms will be required to notify their intention to register for temporary permissions before 1 April 2019 and they will then need to go through the full authorisation process.
As well a change in jurisdiction, new rules are being put in place which will ensure that CMCs will in effect face a similar regime to that which exists in the financial services industry.
The FCA will require CMCs to comply with certain parts of the FCA’s existing Handbook applicable to the firms authorised to undertake investment business. Among the new requirements will be rules and guidance concerning:
Ultimately the new regime is seeking to improve conduct and ensure the protection of consumers.
Andrew Bailey, Chief Executive of the FCA has said that a well-functioning claims management sector can help to provide justice and redress to people who have suffered harm. He added that a key element of the approach to regulation will be ensuring that consumers are both protected and treated fairly.
The changes to the regulatory regime for CMCs should mean that the CMCs are more robustly held to account. It has been estimated that 74% of CMCs turnover comes from financial services/lenders.
The regulations will include Section 75 of Consumer Credit Act claims. This should mean that lenders’ hopefully see a higher standard and reducing costs for themselves and consumers. Lenders would may also find it prudent to ensure that going forward they monitor that the claims companies they are dealing with have the appropriate approval.