FCA proposes CMC fee price cap

The Financial Conduct Authority (FCA) has published proposals to introduce a price cap on the fees claims management companies (CMCs) charge their customers in relation to claims for financial products and services.

Some consumers currently pay fees of more than 40% of the redress they receive. The proposed cap restricts this, and will mean CMCs won’t be able to charge more than 15-30% depending on how much redress a consumer is due. This will see some consumers saving several thousand pounds on the fees they pay to CMCs.

The cap will apply to all claims where a consumer is awarded monetary redress, apart from PPI claims which are already subject to a cap set by Parliament.

As part of the proposals, CMCs will be required to disclose key information, such as giving consumers more information about how the fees they pay will be calculated and better signposting to the free alternative routes to redress available.

This information must be disclosed to consumers before they enter into a contract, to help consumers make better-informed decisions about using CMC services.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:

'We took over regulation of CMCs in April 2019, and have since been proactively supervising the sector. When working well, CMCs can provide useful services for consumers. However, consumers can experience harm when they do not understand the nature of the service CMCs provide and where they are charged excessive fees. The proposals we have announced today are designed to address this.

'We estimate that the proposed cap on fees could save consumers around £9.6m a year.'

Apart from PPI, the vast majority of financial services and products claims currently being managed by CMCs relate to four particular financial services or products: packaged bank accounts, loans, savings and investments, and pensions.

There is currently a PPI price cap for CMCs, which is 20% of the redress paid to the consumer. Due to the period of change the PPI market is undergoing the FCA is not proposing to change it at this time. Therefore, claims that relate to PPI will remain capped at 20% and will be unaffected by these proposals.

The consultation is open until 21 April 2021. A policy statement is expected to be published in Autumn 2021. If a fee cap is confirmed the FCA will monitor its effects on the CMC market and its consumers.

Notes to editors

Proposed price cap bands

Consumer redress obtained  Max % rate of charge Max total fee
  Lower (£) Upper (£)    
1 £1 £1,499 30% £420
2 £1, 500 £9,999 28% £2,500
3 £10,000 £24,999 25% £5,000
4 £25,000 £49,999 20% £7,500
5 £50,000 NA 15% £10,000


Case study: Mrs and Mr M’s investment

o    Mrs and Mr M used a CMC to claim redress for a mis-sold investment. They signed an agreement to pay 48% (including VAT) of any redress they were awarded under the claim.
o    Having found that it mis-sold the investment to Mrs and Mr M, their bank awarded them redress of £56,447 to put them back in the position they would have been in had they not been mis-sold the investment. 
o    Under the current rules, Mr and Mrs M had to pay £27k in fees, however under the proposed rules they would have paid just over 10k, saving them around 17k.

  • The Financial Guidance and Claims Act, which brought CMCs in to the FCA’s perimeter, also placed a specific statutory duty on the FCA to make rules with a view to securing an appropriate degree of consumer protection from excessive charges by financial services CMCs. The proposals in this consultation paper set out how we intend to meet that duty. 
  • The proposals in this consultation do not apply to claims management activity outside of the Financial services sector.
  • The proposals in this consultation paper are part of our wider regulation of the market. Since taking on the regulation of CMCs in April 2019, the FCA has introduced rules focused on protecting consumers from harm. The FCA has already published a portfolio strategy letter (October 2020), two ‘Dear CEO’ letters reminding CMCs of its expectations around financial promotions and acting for their customers (June 2019) and the importance of carrying out due diligence to ensure the validity of claims (October 2019). There was also a joint statement issued with the Information Commissioner’s Office and the Financial Services Compensation Scheme (FSCS), reminding firms and Insolvency Practitioners of their responsibilities when handling personal data and directing consumers to FSCS (February 2020).

Read CP21/1: Restricting CMC charges for financial products and services claims (PDF)

Read IFF Research: Claims Management Companies (CMC) Fee Rules Research - Financial Services Claims (PDF)