On 15 February 2024, the FCA published the key findings of its multi-firm review of Claims Management Companies (CMCs) carrying out unregulated claims, to assess whether firms were using their FCA authorisation to legitimise services that are not regulated.

This stemmed from the FCA’s concerns that consumers may mistakenly assume that all the services CMCs offer come within the remit of FCA regulation, which it warned could mislead consumers about the level of protection they have and give unregulated activities extra credibility. In the FCA’S last portfolio strategy letter to CMCs, the regulator explained it would carry out proactive work to assess and address consumer harm. It issued substantive information requests to 26 CMCs offering unregulated claims services for matters such as tax, timeshare, diesel emissions and flight delay claims.

Key findings

The FCA found that some of the sample of firms had:

  • Undertaken very little, or no regulated claims management activity. Some firms in the sample have applied to cancel their FCA permissions following the FCA’S contact, and around 70% have stopped unregulated claims activity. 
  • Inadequate systems and controls in place to differentiate between regulated and unregulated claims activity. 
  • Charged significantly higher fees for unregulated claims activity. Although the FCA does not have regulatory oversight of these activities, it considers that firms will want to satisfy themselves on whether this is appropriate. 
  • Non-compliant financial promotions.

The FCA expects all firms to consider the findings of the multi-firm work and make necessary changes. Firms must regularly review their regulatory permissions to ensure these are up to date and apply to the FCA to remove them if they are not needed. The FCA expects firms to notify them of material changes and apply to make any necessary changes in a timely way. Firms are also expected to be clear with consumers about which of their products and services are regulated and which are not.

In line with the Consumer Duty, the FCA also reminds CMCs that they must ensure that communications are likely to be understood by the consumers they are intended for, and that these communications equip consumers to make decisions that tare effective, timely and properly informed. This includes paying particular attention to how clear they have made it to consumers that the service they are agreeing to use is not regulated, for example by reviewing all communications with consumers, including financial promotions. CMCs should also review the terms and conditions of their unregulated claims services to ensure contractual documentation is clear and fair. Furthermore, CMCs must ensure that their products and services provide fair value, with a reasonable relationship between the price consumers pay and the benefit they receive.