New rules for claims management firms from today
Unhappy customers who have used claims management firms will be able to escalate their complaints to the financial ombudsman from today, as the sector will now be regulated by the Financial Conduct Authority.
Claims management companies offer to handle consumer claims including personal injury, mis-sold PPI and section 75 – but there has been increasing concern about some firms, and the Government commissioned an independent review into the sector in 2015.
From today, claims management companies which were set up or operate in England, Scotland or Wales will have to apply to the Financial Conduct Authority (FCA) for authorisation. This in turn means complaints about the firms can be escalated to the Financial Ombudsman Service (FOS).
Nine hundred firms have already applied for 'temporary permission' to carry on running while they're being authorised.
If firms fail to comply with FCA rules, they risk being hit with a fine or being denied authorisation, meaning they wouldn't legally be able to handle claims.
If you're trying to reclaim cash, you can often do it yourself for free. See our Reclaim PPI for Free guide and other Reclaim guides for full help.
What are the new rules for claims management firms?
Claims management firms will need to meet FCA requirements including:
- Checking 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.
There will also be rules to make sure firms don't encourage customers to make claims which don't have a good basis.
- Keeping 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.
The FCA says this will reduce high-pressure sales tactics and help firms properly resolve customer complaints.
- Telling customers about free alternatives. Marketing material and pre-contract information must mention any relevant ombudsman schemes which the customer could use for free.
- Telling customers key info before entering into a contract. Claims management companies (CMCs) 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.
- Keeping 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 can I do if I have a complaint?
From today, consumers can take any complaints about claims management firms to the new Claims Management Ombudsman, which is part of the FOS.
Before submitting your complaint, you must talk to the claims management firm directly to try and get a resolution. But if you're not happy with its response, or it doesn't get back to you within eight weeks, you can escalate your case to the Claims Management Ombudsman.
It will look into your case and if it decides in your favour, it can order the claims management firm to put things right, which could include paying you compensation for any financial losses.
Before today, complaints were handled by the Legal Ombudsman. If you've already submitted a compliant about a claims management firm to the Legal Ombudsman, your case will be transferred across to the Claims Management Ombudsman.
What does the regulator say?
Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said: "The new regime has consumer protection and CMC professionalism at its heart. It will mean that customers will be protected from claims management cowboys and get a better deal."
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