The FCA has written to claims management companies (CMCs) outlining its supervision strategy, including its updated view of the harms and risks that CMCs pose and its expectations for firms in the sector.
The FCA outlined 3 key workstreams in the last 2 years:
- The ‘halo effect’ in unregulated claims
- Following the FCAs engagement with 26 CMCs processing unregulated claims, the majority ceased their unregulated claims activity.
- The amount of inbound contacts it has received about unregulated claims has since fallen.
- Client money
- Regulatory reporting demonstrated that several CMCs were failing to comply with client assets obligations.
- In particular, historic client money was being held in client accounts, reconciliation procedures were ineffective and annual client account auditing was not being conducted consistently.
- Since engaging with CMCs handling client money in November 2023, the FCA has observed raised standards, with 1/3 of firms deciding to stop handling client money and around 80% of historic client money being repaid.
- Lead generation
- Of 30 CMCs the FCA engaged with who were either referring or obtaining leads from third parties, almost 90% were non-compliant with CMCOB 2.2 requirements.
- The FCA’s review resulted in improved systems and controls, and the proportion of complaints upheld by the Claims Management Ombudsman has reduced.
Over the next 2 years, the FCA plans to focus supervision on embedding the Consumer Duty, improving service standards, the personal injury sector, and lead generation.
The PRA also reminds firms of their notification obligations, and asks that firms pay particular attention to the following issues:
- Misleading advertising
- Inappropriate sourcing of customers
- Poor service standards
- Consumer understanding
- The ‘halo effect’
- Poor attitude to regulatory obligations
- Financial services claims