On 1 April 2019, the FCA will become the regulator of claims management companies (CMCs) established or serving customers, in England, Wales and Scotland. At the same time the Financial Ombudsman Service (FOS) will become responsible for resolving disputes about CMCs.
On 5 June 2018, the FCA published a consultation paper, CP18/15, on how it proposes to regulate CMCs when the responsibility for regulating the sector is transferred to it. The consultation paper sets out the draft rules and guidance the FCA proposes to make in relation to claims management. These draft rules set out the standards that the FCA thinks CMCs regulated by it should have to meet.
The FCA also sets out why and how it enforces its rules, and the process for CMCs to become authorised by the FCA. The consultation paper also sets out proposed changes to the compulsory and voluntary jurisdictions of the FOS and is a joint consultation with the FOS on those changes.
The FCA says that all CMCs it regulates will need to follow certain rules so they manage their business effectively and treat their customers fairly. These will include rules based on existing Claims Management Regulator rules as well as new requirements. The FCA proposes to apply the rules which generally apply to all the firms it regulates, such as the Principles for Businesses (PRIN), to CMCs.
It is also proposing to apply rules that are specific to CMCs. These will help address the specific harms identified in the sector and take account of the business models of CMCs. These rules will be contained in a separate section of the FCA Handbook called the Claims Management: Conduct of Business sourcebook.
The FCA also plans to extend the senior managers and certification regime to CMCs although this proposal will be consulted upon separately in autumn 2018.
Comments are requested by 3 August 2018. The FCA intends to publish a policy statement containing final rules in the fourth quarter of 2018.
The House of Commons Library has published a briefing paper on CMCs which outlines the regulatory structure surrounding them and also contains an outline of the new FCA regime as proposed above.