FCA Publishes Portfolio Strategy Letter for CMCs

The FCA has published its Portfolio Letter outlining its Portfolio Strategy for Claims Management Companies (CMCs).

The FCA sets out its updated view of harm and key risks that CMCs pose to their customers, its expectation of CMCs, and its supervisory strategy to ensure firms are meeting expectations, and harms are being remedied and/or mitigated.

The key drivers of harm the FCA has highlighted are:

• misleading, unclear and unfair advertising;
• CMCs use of their FCA authorisation to legitimise their non-regulated services;
• inappropriate sourcing of customers;
• firms failing to investigate the existence and merits of each element of a potential claim;
• poor attitude to regulatory obligations;
• poor complaint handling and inability to identify vulnerable customers.

The Portfolio Letter outlines some examples of how CMCs will need to prepare for the implementation of the Consumer Duty, which comes into force on 31 July 2023. It also provides that CMCs should be giving consideration to additional areas of potential harm, such as data-led regulation, and environmental, social and governance (ESG) strategy.

The FCA highlights that it will focus its strategy for CMCs on the following areas:

• CMCs conducting both unregulated and regulated activities;
• CMCs using lead generators;
• service standards.