Claims management companies; 18 months under FCA regulation
“Hello” said the robotic voice, “This is about the accident you were involved in”….
Yes, most of us have had those calls, asking if you want to make a claim for an accident that you weren’t involved in. But 18 months on from when the FCA assumed regulation of claims management companies (CMCs), has this improved standards?
The FCA recently released details of 200+ CMC financial promotions, across various media, revealing widespread poor practice. Actually, although that’s lots of poor practice revealed, this means things are getting better, because the FCA are revealing it…and then going on to do something about it.
Examples of bad practice revealed by the FCA include firms that:
- Failed to identify themselves as a CMC.
- Failed to tell the customer they could claim via an ombudsman or compensation scheme without using a CMC, and without paying a fee.
- Used the term “no win no fee” but didn’t set out the fees the customer must pay.
- Included only examples where compensation to consumers was very high.
- Included important information in small font or in a position difficult to see.
Jonathan Davidson, executive director of supervision for retail and authorisations at the FCA, said: “Many CMCs play a significant role in helping consumers to secure compensation. But CMCs using misleading, unclear and unfair advertising practices to get business is completely unacceptable. We won’t hesitate to take action where we consider that customers are being misled or otherwise treated unfairly by poor advertising.”
And the FCA have taken action. As well as highlighting concerns to individual CMCs and visiting them where necessary to prompt action to improve things, they’ve also started issuing fines for poor practices.
Professional Personal Claims Ltd (PPC) is just one example. PPC was fined £70,000 for using websites and marketing materials to mislead customers. For example, they used the names and logos of five major banks in their marketing materials to mislead customers into believing that the customers were submitting PPI claims directly to their banks, rather than engaging a CMC for a fee.
So, the FCA is taking a much more proactive approach than its predecessor. In fact, some have likened what’s happening to when the FCA took over the regulation of the consumer credit sector. There, hundreds of firms had their permissions revoked for failing to act openly and honestly with the FCA or to meet the FCA's threshold conditions. Watch this space to see if CMCs go the same way.
Don’t forget that here at Access we can help with compliance. For CMCs, we have unique eLearning content to help achieve what the FCA wants. Not only is it written by leading industry experts, but it also uses award-winning learning design to bring the various topics to life on screen. There’s also an opportunity to test your knowledge and ability to apply it, with an assessment.
18 months on from 1 April 2019 when the FCA assumed regulation of CMCs it seems they’re serious. It was no April fool.