The Financial Conduct Authority and the Competition and Markets Authority will work together to ensure effective competition for consumers using claim management companies.
This week, the co-operation agreement between the two regulators was updated ‘to reflect the FCA’s new concurrent competition jurisdiction in relation to the provision of claims management services in Great Britain’.
The FCA and claims management regulation
The FCA took over regulation of claims management firms (businesses that help consumers seek compensation from finance companies) on 1 April this year.
The new requirements for claims management companies (CMCs) under FCA authorisation include:
- Due diligence on lead generation and rules to prevent firms encouraging customers to make fraudulent, frivolous or vexatious claims or claims which have no good basis
- Providing clear, upfront information to customers about the fees they charge and the services they will provide
- Giving customers a summary document about the services they will provide before the customer signs a contract
- Telling customers about free alternatives such as the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS), including in advertising
- Recording and retaining customer telephone calls for a year after their final contact with a customer will reduce the chances of high-pressure sales techniques and support robust resolution of customer complaints
Falling under the remit of the FCA means that CMCs now need to comply with all the Authority’s regulations, including the extension of the Senior Managers and Certification Regime that comes into force in December.
Tackling unethical practices
In June, the financial regulator sent a ‘Dear CEO’ letter to claims management firms, reminding them of their obligations under FCA regulation and flagging a number of areas where the regulator has found practices falling short of its standards.
It’s not the first time the two regulators (FCA and CMA) have supported each other’s efforts either – we reported in June that the two were working together on the ‘super complaint’ launched by Citizen’s Advice on unfair treatment of loyal customers.
In the updated ‘memorandum of understanding’, the FCA and CMA said they would work together to investigate cases of suspected anti-competitive behaviour by CMCs.
The FCA also requires firms that obtain lead lists from third parties to carry out due diligence on whether this data has been obtained legally and keep records of this. This fits with broader regulation on data management, like the GDPR.
How CMCs can live up to the FCA’s requirements
If you’re a CMC looking to ensure you meet the requirements of the FCA and CMA, what steps should you be taking?
- If the world of regulated marketing is new to you, read up on what constitutes a financial promotion.
- Build a governance-oriented culture that supports your efforts to comply with FCA requirements.
- Get your communications in shape. The FCA has specific rules about Treating Customers Fairly which will be relevant to CMCs.
- Make sure your marketing and customer communications are ‘fair, clear and not misleading’.
- Pay particular attention to your communications with customers who may be vulnerable – an area of focus for the financial regulator.
- Getting Compliance team approval for promotions is something newly-regulated firms have to get to grips with. Read our 6 tips for making your approval process better for advice.
- Make sure regulatory compliance is mandated in your processes. Find out how you can build in Compliance team approval to your promotions process and how technology can help Compliance teams minimise the risk of regulatory breaches.
Get to grips with financial promotions compliance with our free checklist
If you are a CMC getting used to operating under FCA regulation, you might find our useful.
It details the five key stages to producing financial promotions with tips on ensuring that yours are compliant – and you can download it for free here.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.