FCA – “many CMCs help to secure redress for consumers”
The Financial Conduct Authority [FCA] has recently issued a consultation paper [CP18/15] in respect of its draft rules for Claims Management Companies [CMCs]. This consultation sets out its plans for when the FCA takes over the regulation of CMCs from the Claims Management Regulator [CMR] in April 2019.
Published news relating to fees; rules are already in place!
The consultation paper spans some 264 pages and although there are some aspects that will be new to CMCs, such as the Senior Management & Certification Regime [SM&CR], many of the suggestions highlighted in the trade press are not new or, frankly, radical. The press ‘noise’ relates to fees, transparency, no upfront fees, showing clients what they will be charged before entering into an agreement; most of this is already in place within the CMR Conduct of Business Rules for Authorised Persons 2018 (which is 14 pages!). Just one example; Professional Advisor ran an article under the headline “FCA: Claims management companies to highlight free alternatives”. CMCs already do this under the existing conduct rules.
Remember the FSA 2004?
Additionally, where a claim falls with the Criminal Injuries Compensation Authority, the Financial Ombudsman Service, the Financial Services Compensation Scheme, the Housing Ombudsman Service or any other recognised dispute resolution procedures’ CMCs confirm before the contract with the CMC is signed it is stated, using a CMC may not result in a more favourable outcome. On initial reading, one is left with the feeling of Déjà vu. I remember how the 14 page Mortgage Code expanded similarly when the mortgage industry self-regulation processes under The Mortgage Code Compliance Board gave way to the Financial Services Authority [FSA] in 2004.
FCA “many CMCs help to secure redress for consumers”
The trade press seems to miss the point. Without professional CMCs, many consumers would not know that they had been sold Payment Protection Insurance [PPI]. At least the FCA recognises this fact at it states, “Many CMCs help to secure redress for customers, including those who might otherwise not have made a claim. Our Financial Lives survey indicates that 67% of customers who used a CMC over the last three years to make a financial services claim wouldn’t have done so without the involvement of a CMC. CMCs can also act as an effective check and balance against poor practice by firms.” It seems odd that the ‘nuisance’ element of the CMCs industry have created a situation where even professional firms, who provide access to justice to consumers who would otherwise have lost out to corporate greed, are vilified.
Banks and their shareholders will benefit!
Sadly, the ‘witch hunt’ is and will result in further detriment to consumers. The PFCA have regularly raised concerns that the FCA PPI deadline campaign is not working. Our independent Populus surveys continue to show awareness of the deadline is not reaching the consumers that need to be aware of it and it is not motivating those who should claim to do so. The bottom line is simple; if nothing changes the shareholders of banks will receive a boost to the balance sheet of the organisations they invest in of around £70bn in unclaimed redress which has not hit the provisioning models and will not be paid out!