The Government is switching the regulation of claims management companies (CMCs) to the Financial Conduct Authority (FCA) over fears the market is not being supervised properly.
The decision followed a review that stated there was a widely held perception by stakeholders and the Government of widespread misconduct among claims management companies.
It found that the former regulator, the Claims Management Regulation Unit (CMRU), lacked sufficient powers and resources to supervise the market properly.
The review stated: “CMCs continue to fuel speculative claims for redress, particularly in financial sectors.”
CMCs continue to fuel speculative claims for redress, particularly in financial sectors.Conduct issues identified by the review included poor value-for-money services offered by CMCs, misrepresentation of the service offered to consumers, nuisance calls and text messages sent to consumers as well as progression-inappropriate claims by CMCs.
The review added that in light of the evidence seen, it was clear that the existing regulatory regime required strengthening in several areas.
The review stated it did not encounter any evidence to suggest the regulator’s existing enforcement or rule-making capabilities were excessive or unnecessary and therefore they were to be retained.
Additionally, the CMRU’s website is to be optimised to help consumers choose a service appropriate for their needs.
Another recommendation stated the CMRU should seek to make wider use of warrants and seizure powers, as well as seeking support to encourage compliance rather than enforcement, through greater use of regulatory roadshows, workshops, and training support.
It added that a proportion of receipts from enforcement activity such as fines should be used to subsidise enforcement activities – the idea being that this would mitigate the risk of unsustainable increases in the regulatory levy resulting from a further drop in the number of regulated CMCs.
Adviser view:
Paul Lindifeld, director of wealth management at Manchester-based Sedulo Wealth Management, said: “Everybody pretty much agrees with that. We all get inundated with nuisance texts and calls.
“Obviously, these companies are switching their attention to financial services with other industries dying out. They need to be policed more if they are coming into this market to make a quick buck.”
ruth.gillbe@ft.com
