On 4 June 2019, the FCA published a Dear CEO letter setting out its expectations of claims management companies (CMCs) when they carry out financial promotions and/or act for their customers.
The FCA notes that recently it has seen a number of issues regarding:
- CMCs acting for their customers without getting their appropriate consent or completed letters of authority;
- CMCs submitting letters of authority and claims in fictitious customer names;
- no relationship existing between the customer and the financial service provider receiving claims; and
- CMCs’ financial promotions not complying with FCA rules.
The FCA reminds CMCs of its expectations in the following areas:
- claims management activities under the FCA’s scope;
- the need to receive letters of authority before acting for customers;
- that claims must have a good base and CMCs should investigate the existence and merits of each element of a potential claim;
- systems and controls;
- ensuring financial promotions are fair, clear and not misleading; and
- keeping proper records.
There is a warning from the FCA that CMC’s should not ignore the letter and that if they do not comply with the regulator’s rules the FCA can impose requirements on them or remove their permission.