On 5 June 2018, the FCA published Consultation Paper 18/15: Claims management (CP18/15). In CP18/15 the FCA sets out the draft rules and guidance it proposes to make in relation to claims management, and asks a series of questions about the proposals. The draft rules set out the standards that the FCA thinks claims management companies (CMCs) regulated by it should have to meet (on 1 April 2019 the FCA will become the regulator of CMCs established or serving customers in England, Wales and Scotland).
The FCA’s proposals include:
- before a CMC agrees a contract with a customer, they will need to give them a short summary document containing important information. This will include, among other things, an illustration or estimate of the fees charged, an overview of the services the CMC will provide and the tasks customers will need to undertake themselves;
- when CMCs know the likely value of a claim they must provide the customer with an updated estimate of any potential fees;
- where CMCs advertise a ‘no-win, no-fee’ or similar service, the advert will have to include a prominent indication of the fees the CMC will charge or how they would be calculated. The advert will also have to indicate, where relevant, that there are statutory ombudsman or compensation schemes that the customer could use for free;
- that CMCs will have to record all calls with customers and keep the recordings for a minimum of 12 months;
- that CMCs will have to keep a record of electronic communications such as emails and text messages;
- that CMCs will need to meet prudential requirements related to the type of business they undertake, their total income, their expenditure and whether they hold client money;
- that where CMCs hold client money it will need to be segregated fro their own money and held on trust. CMCs will also need to maintain accurate and up-to-date records that identify the client money they hold on behalf of each client;
- requiring CMCs that buy leads from third parties to carry out sufficient due diligence to determine whether the lead generator is authorised and has appropriate systems and processes in place to ensure compliance with relevant data protection, privacy and electronic communications legislation; and
- making certain amendments to the Supervision manual so that it will also apply to CMCs.
The deadline for comments on CP18/15 is 3 August 2018.
The FCA proposes that the new requirements will apply from 1 April 2019 unless otherwise specified.