We are setting out new rules for claims management companies (CMCs) to protect consumers against excessive charges.
Why we are changing
We are restricting the fees CMCs charge for managing claims about non-PPI financial products and services through a fee cap. The fee cap allows CMCs to continue delivering value to both individual customers and wider society while generally preventing fees that are higher than necessary to deliver that value.
We are also enhancing the requirements for CMCs to give consumers important information in the pre-contract stage, and making some minor updates and clarifications to other rules for CMCs.
We estimate that the fee cap will deliver consumer benefits of around £9.6m a year.
Who this applies to
Our rules relating to fees and disclosure affect CMCs managing claims about non-PPI financial products and services, and consumers who might wish to use the services of those CMCs. Our minor amendments to CMCOB, and some of our disclosure rules, affect all FCA-regulated CMCs.
Background to CMC fees
Under the Financial Guidance and Claims Act 2018, Parliament transferred regulation of CMCs to the FCA. It also gave us a duty to make rules about CMC fees for claims relating to financial products and services. This requires us to make rules to secure an appropriate degree of protection against excessive CMC charges.
What you need to do next
The legal instrument accompanying the Policy Statement contains final rules and guidance. These will come into force on 1 March 2022.
If your firm is affected by these changes, you need to ensure you are able to comply by that date.
What we will do next
We will monitor the cap’s effects on the CMC market and its consumers through regulatory returns and ongoing supervisory work.
We will annually monitor whether average fees by product type calculated from regulatory return data and the existing estimates of value from CP21/1 suggest significant excessive charging. If we find evidence of this, we will review the fee cap and disclosure rules after they have been in force for 2 years. We will also review the cap in later years if we find evidence it is not achieving its objective.