Claims management companies: our regulation

On 1 April 2019 we will become the regulator of claims management companies (CMCs). Read this page to understand what this means for your firm, whether you are new to regulation or already FCA-regulated, and your next steps.

FCA explains - CMCs regulation

Find out 5 things CMCs need to know to get ready for regulation.

The countdown to a new era of regulation for claims management companies is underway with a focus on driving up standards of conduct and boosting consumer protection. We want CMCs to be trusted providers of high quality, good value services that help people pursue legitimate claims for redress.

We have 3 main areas of focus:

• Customers – we want customers to be empowered and confident in choosing a value-for-money service which is appropriate for their needs.

• CMCs – we want CMCs to help customers secure redress in a way that complies with our rules and be authorised so that they meet a common set of standards.

• Regulatory – we want to regulate in a way which prioritises high standards of conduct and improves public confidence in claims management services.

There will be a significant shift in the kind of regulation firms will face in the future. Under the FCA, there will be some rules and requirements that will be similar to the current regulator’s rules and requirements.

It is important to make sure your firm is ready for the transfer, and is able to cope with the changes. This will be necessary whether you have been authorised for a long time, or whether you are entering regulation for the first time (eg, firms operating solely in Scotland, or firms who solely handle claims in relation to Section 75 of the Consumer Credit Act). There are several elements to the FCA’s regime that you need to be familiar with to ensure you are fully prepared for the transfer. These are explained in more detail:

Entering FCA regulation

Full authorisation

Our rules

After authorisation

Who needs to be authorised

Some activities you may want to carry out as part of your business will require you by law from April 2019 to have approval from the FCA. Different types of activity may require different ‘permissions’. 

You may see the terms ‘permission’ and ‘authorisation’.  Authorisation is the process you will go through for the FCA to grant you permission to carry out regulated activities. See how to apply for authorisation.

Any claims management company constituted under law of part of Great Britain (ie, England, Wales and Scotland) or serving customers in Great Britain must have permission to carry out regulated activities from be regulated by the FCA from April 2019.

Under the current regime operated by the Claims Management Regulator (CMR), there is a single permission for all regulated claims management activity across 6 sectors. This means an authorised CMC can do any regulated activity in any of the 6 sectors: 

  • financial services & products
  • personal injury
  • housing disrepair
  • specified benefit
  • criminal injury
  • employment

One of the main changes of the transition to the FCA is that there will be 7 separate permissions in total:

  • one permission for lead-generation activities (irrespective of the CMC sector), and
  • one permission for each sector listed above (6 in total) covering the activities of:
    • advising a claimant
    • investigating a claim
    • representing a claimant

Depending on which activities the firm performs, and in which sector they bring claims, some CMCs may only need one permission, but others may require several.

Firms that are regulated by the CMR

You will have to register for temporary permission by 31 March 2019 if you want to continue trading after 1 April 2019. CMCs currently regulated by the CMR will not automatically transfer to the FCA. You will need to register whether you have been authorised for a long time or are entering regulation for the first time. Once you obtain temporary permission, you will be given a new Firm Registration Number (FRN) and must use this in future. After you receive temporary permission, you will need to apply for full authorisation.

Firms entering claims management regulation for the first time

The laws that were created to transfer regulation of claims management to the FCA also made some changes to which firms are regulated. This means some firms will be entering regulation for the first time. This mostly relates to:

  • firms that are incorporated in Scotland, and only serve Scottish customers, or
  • firms that only handle claims about Section 75 of the Consumer Credit Act 1974

These firms still need to register with us for temporary permission to continue operating. See temporary permission for more information.

When these firms register for temporary permission, we will check that the firm is entitled to register. This means making sure that the information submitted by the firm about its trading history is truthful and accurate.

They will then need to apply for authorisation in application period 1, which will be open from 1 April to 31 May 2019. This is when we will assess whether or not the firm meets our requirements and conduct standards.

  • firms that wish to start claims management activity

These firms will need to decide whether to submit their application to the CMR or to wait and submit to the FCA after 1 April 2019. This creates 2 scenarios:

1. Firm submits its application for CMR and pays the applications fee:

If determined: it will need to register for TP between January to end-March and then apply for authorisation during its application period. It will be asked to pay the periodic fee during TP registration and an application fee when it applies but it will be able to perform CMC-regulated activities from its date of CMR authorisation

If not determined: its application will be passed to the FCA and applicant will need to complete a ‘top-up’ form and pay the top-up application fee if there is one. It will not be able to perform any CMC-regulated activity until its application has been determined.

2. Firm submits its application on/after 1 April 2019 and applies directly to the FCA, paying one application fee. This means that they will submit only one application but they will not be able to perform any regulated activity until their application has been determined.

It is up to the firm to decide which approach it takes, but the closer it gets to the transfer date it may make sense to delay the application and apply directly to the FCA.

CMCs that are already authorised by the FCA

Firms already authorised by the FCA (firms with Part 4A permissions) will need to apply for a variation of permission (VoP) to add claims management as a permission.

These firms will only pay 50% of the application fee, because we have already established that they have satisfied our Threshold Conditions (the minimum standards for authorisation), reducing our authorisations process.

You will have to apply for VoP in the correct application period, otherwise you'll lose your temporary permission for CMC activity. You would still retain your authorisation status for any other FCA-regulated permissions.

Next steps

See temporary permission to understand the process for registering for temporary permission.


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