The Financial Conduct Authority says it hopes to “drive up standards” in the claims management sector, when it starts regulating this area of business from April next year.
The watchdog has published the rules and fees that will apply to these claims management firms. All companies will have to be authorised and meet minimum standards to operate legally in the UK.
This includes being transparent about fees, and informing customers in advance that there is a free Ombudsman service.
The FCA says this new rule book should ensure CMCs are “trusted providers of high quality, good value services” that help customers pursue legitimate claims for redress, and benefit the public interest.
Firms can start applying for “temporary permission” to operate in January. This should ensure they that can continue operating until they are fully FCA-authorised during one of the two waves, running from April until the end of July.
The FCA’s executive director of supervision Jonathan Davidson says: “The new regime aims to drive up standards in a sector whose reputation has been tarnished by some companies engaging in high pressure selling and by failing to provide clear information on the fees they charge.
“The new rules will ensure firms are transparent about their estimated fees before the customer signs on the dotted line, and notify customers of free statutory ombudsmen or compensation schemes. It’s vital that customers have the information they need to make informed decisions. We will take action against those that break the rules.”