It has now been four months since the Financial Conduct Authority (FCA) began regulating the claims management industry (1st April 2019); this means that all claims management companies (CMCs) will now have to report in to the FCA and will have a new set of standards to adhere to.
Regulation of these companies aims to boost consumer protection and improve the overall professionalism of the sector by driving up standards. The regulator wants CMCs to be trusted providers of high quality, good value services that help consumers pursue legitimate claims for redress.
No doubt you would agree that these standards are long overdue and should lead to improved standards.
Since 2007 the government has become increasingly concerned about the conduct within the claims management sector and therefore requested an independent review which ultimately resulted in the transference of responsibility for this type of business from the Ministry of Justice to the Financial Conduct Authority.
In practice this means that there are now seven new permissions that are available to CMCs and they will need to apply for the relevant ones according to their business model (in much the same way as we work currently with our financial services permissions).
The most relevant permission to our business covers “advising, investigating or investigating in relation to a financial services or financial products claim”. However, we have stopped short of applying for this permission currently as none of our advisers should be acting in a ‘claims management’ capacity.
In the interest of clarity, it is important to explain that no firm should be acting for, or pursuing a claim by way of legal proceedings or through a compensation scheme (Financial Ombudsman Service / Financial Services Compensation Scheme) on behalf of a client. Doing this would constitute a claims management activity and would require new FCA claims management permissions.
This does not prevent an adviser from identifying and subsequently pursuing a claim on behalf of a client completely.
For example, where an omission or error made by a provider has resulted in financial detriment to your client, it should still be possible for you to pursue recompense with the provider on behalf of your client. However, it must be an existing client of your firm, i.e. this service would run incidental to any other service which your firm provides to the client. The process of pursuing any recompense cannot be a chargeable service which is provided
It is best practice to direct customers with claims needs to one of the free support services which exist such as the Financial Ombudsman Service, or the Money Advice Service. You may, of course provide guidance in this regard, but support should be limited to any regulated activity which you are providing.
So, in summary…
- Claims management standards should be improving;
- Network advisers aren’t authorised to conduct an claims management/handling work;
- Clients can be supported but should be passed to an appropriate service to be supported through claims.