On 31 March 2021, the FCA issued a press release reminding high cost lenders (HCLs) and claims management companies (CMCs) that it expects them to work together to resolve disputes and disagreements in the interest of their customers. HCLs and CMCs are also encouraged to agree streamlined claims handling processes with each other, where possible.
The FCA sets out on the press release examples of some of the issues causing tension between CMCs and HCLs.
The FCA also states on the press release that it has investigated complaints from HCL firms about CMCs. The FCA has found that, in most cases, the customer has legitimate grounds to complain and is being represented by a CMC with a valid letter of authority. However, the FCA reminds CMCs that:
- They must not make or pursue a claim if they have reasonable grounds to suspect the claim does not have a good arguable base or is fraudulent, frivolous or vexatious.
- They should take all reasonable steps to investigate the existence and merits of each element of a potential claim before making or pursuing a claim.
- Their investigations should enable them to make representations when presenting a claim which: substantiate the basis of the claim; relate to the nature of the claim and are specific to the claim; and are not false, misleading or an exaggeration.
In October 2020 the FCA sent a letter to the CEOs of CMCs setting out its supervisory strategy for CMCs. The FCA has also sent a letter to the CEOs of HCLs in 2019 setting out its view of the key risks that those firms pose, and noting that it had seen increasing numbers of complaints against these firms.