FCA brings in fee cap for claims management firms saving consumers almost £10m a year - here's what's happening
A cap on the fees claims management companies charge customers has been introduced by the financial services regulator today, which it says will leave some people £1,000s better off.
Under the Financial Conduct Authority's (FCA) new rules, claims management firms can now only take a cut of between 15% and 30% or between £420 and £10,000 - whichever is lower - of any redress won for consumers. Until today, it was common to see some firms take "excessive" fees of up to 40% on claims for mis-sold loans or pensions - though PPI claims were already subject to a 20% cap set by Parliament.
The changes are expected to save consumers £9.6 million a year and thousands of pounds on some individual claims. Proposals on the 15% to 30% fee cap put forward last year had previously been welcomed by MoneySavingExpert.com founder Martin Lewis.
Of course, it's usually simple to reclaim yourself, for free. We have guides on how to Reclaim Packaged Bank Account Charges, Bank Charges and Payday Loans, along with various other products, for free, without using fee-charging claims companies.
The exact fee cap depends on how much you reclaim
The new cap, which applies to claims relating to new contracts entered into from 1 March 2022, applies to most claims where a consumer is awarded monetary redress from a financial services firm. For other financial services claims (other than PPI), the rules require charges to be "reasonable".
Under the rules, firms have to charge the lower of either a percentage cap or fee cap set by the FCA, which varies depending on how much redress is reclaimed. See the table below for the full details.
Claims firms must also disclose how the cap works
Under the new rules, claims management firms must also disclose and give consumers detail about how fees will be calculated, and make sure they are aware of the free routes to redress available.
It remains the case that if you make a complaint or a claim about a financial services provider to the Financial Ombudsman Service (or to the Financial Services Compensation Scheme where a firm has gone bust) that you can keep all of any redress awarded.