A number of claims management companies have withdrawn their applications for authorisation after the Financial Services Compensation Scheme pointed out poor practice.
In an update from the FSCS, published this morning (May 21), the lifeboat scheme said it notified the Financial Conduct Authority after coming across “potential harm to consumers or levy payers from CMC activity”.
The regulator assesses all the cases it receives from the FSCS and so far 79 CMCs have withdrawn their applications for the full FCA authorisation process as a result.
The lifeboat scheme stated: “FSCS is committed to work with all stakeholders to help reduce poor outcomes for customers; that in turn will decrease the total compensation levy payers have to fund.”
The FSCS announced this morning the levy it will collect from the industry for 2020/21 is £649m, £14m more than was forecast in its budget in January.
The FCA assumed control of CMC regulation last year, taking over from the Claims Management Regulator, and received requests from more than 900 companies to continue trading under the new regime.
In June last year the FCA fired warning shots over "problem cases" in the CMC sector, warning low uphold rates for complaints submitted to the Financial Ombudsman Service could work against a firm applying for authorisation.
The watchdog also said it had seen a growing pattern of bogus claims where there was no relationship between the customer and the provider receiving the claim.
Earlier this week (May 18), the FSCS confirmed it would accept application forms signed by CMCs on behalf of vulnerable and elderly clients during the coronavirus lockdown.
But the FSCS made it clear the form must also be accompanied by written confirmation from the CMC that the client has "read and understood the terms" of the completed form and has given their consent for it to be submitted and signed on their behalf.
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