Claims management firms will have to give more info upfront
The financial regulator has published a new set of rules for claims management companies, including providing customers with more transparent fee information and telling them about free alternatives.
There are around 1,200 claims management companies in the UK, including those which handle personal injury, mis-sold PPI and section 75 claims.
But there has been increasing concern in recent years about misconduct from some claims management companies, and the Government commissioned an independent review into the sector in 2015.
As a result, from 1 April 2019 all claims management companies which were set up or operate in England, Scotland or Wales will need to be authorised by the Financial Conduct Authority (FCA) – and if they don't meet FCA standards, they won't legally be allowed to handle claims.
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What are the new rules for claims management firms?
The FCA consulted on its proposals for the new rules over the summer. The rules published today include requirements for claims management companies to:
- Check that customers' details have been obtained legally. Firms which use 'lead generators' must make sure all the information they receive complies with data protection legislation, and keep a record of these checks.
- Keep records of all customer calls. Firms must record all calls with customers, and keep the recordings for at least 12 months after the final contact with the customer, or the conclusion of any contract or complaint.
- Tell customers about free alternatives. Marketing material and pre-contract information must mention any relevant ombudsman schemes which the customer could use for free.
- Tell customers key info before entering into a contract. Claims management companies must provide a one-page summary document setting out the service provided. Before the contract is agreed, firms must also provide a standardised illustration of the fees charged.
- Keep customers updated about the progress of the claim. Firms must let customers know about any new developments for their claim, including giving them a revised estimate of the fee.
What does the FCA say?
FCA executive director of supervision for retail and authorisations Jonathan Davies said: "We're ready to take over regulation on 1 April 2019. 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."
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