Seven out of 10 Claims Management Companies (CMCs) contacted by the FCA in a recent intervention have halted unregulated claims activity.
The FCA, which has regulated CMCs since 1 April 2019, intervened amid signs that many CMCs signed up for FCA permissions but failed to carry out any claims chasing work.
In other cases some CMCs were doing unregulated claims activity alongside regulated claims activity but failing to differentiate their services to clients.
Some clients may have been misled into thinking their CMC was providing a regulated activity when this was not true, the FCA suggested.
The FCA said it carried out the intervention because it was concerned that consumers may mistakenly assume that all the services CMCs offered came within FCA regulation.
Following a letter to CMCs, the FCA asked 26 CMCs offering unregulated claims services for matters such as tax, timeshare, diesel emissions and flight delay claims for more information.
It said that the sample of firms included all the FCA-authorised CMCs that were submitting tax claims. In some cases FCA staff visited the firms’ business premises.
The FCA found that some firms had undertaken, “very little, or no regulated claims management activity.”
Following the visits some firms applied to cancel their FCA permissions following FCA contact, and around 70% have stopped unregulated claims activity, the FCA said.
FCA staff also found inadequate systems and controls in place to differentiate between regulated and unregulated claims activity and that some firms charged significantly higher fees for unregulated claims activity.
The FCA said in a statement this week: “When complying with our rules, CMCs can deliver wider benefits to society, including by helping raise awareness of the opportunity to claim and acting as an additional check and balance on the redress system. Our vision is for CMCs to be trusted providers of high quality, good value services that help people pursue legitimate claims for redress.
“We expect all firms to take account of our findings of this multi-firm work and make necessary changes. If firms are not using their permissions they must regularly review their regulatory permissions to ensure these are up to date, and apply to us to remove them if they are not needed.
“We expect firms to notify us of material changes and apply to make any necessary changes in a timely way. We have the power to cancel a firm’s Part 4A permission if it has not carried out regulated activity for at least 12 months.”
Firms must be clear about regulated and unregulated activity and meet the Consumer Duty rules. They must also not charge excessive fees, the FCA said.
