UK regulator to review claims management companies amid concerns

(Alliance News) - A review into the UK claims management market is being launched by the City regulator following concerns that some consumers are being failed.

The review will look at the root causes of poor practices across the market, such as aggressive marketing, misleading adverts and unfair exit fees, the Financial Conduct Authority said.

Other concerns include consumers being signed up without their consent or ending up with multiple firms representing them, potentially causing confusion and delaying compensation.

The regulator said that the approach to motor finance claims by some CMCs [claims management companies] and law firms has put these issues into sharper focus.

It said it is also concerned about the handling of other claims, such as housing disrepair.

The FCA said it will work closely with the Solicitors Regulation Authority and other regulatory partners.

It will use its review and supervisory and enforcement powers to examine whether consumers receive fair value, including competition on price and quality.

The regulator will also consider whether existing price caps are still fit for purpose, especially where free-to-use redress options exist.

Financial incentives, including fee structures, funding and insurance arrangements will also be examined.

The FCA wants to know whether fee structures create conflicts of interest or lead to poor conduct and outcomes.

It will look at whether lead generation and marketing and advertising delivers good consumer outcomes.

The FCA will examine the practices of firms it regulates, including lead generators, as well as those authorised by others, working with its regulatory partners.

The regulator said it expects full, prompt and open co-operation and working with its regulatory and enforcement partners, it will take robust action if this is not forthcoming.

Where it believes legislative change is needed, it said it will make recommendations to government, or other relevant bodies.

This could include whether CMCs and law firms should be subject to stronger compensation mechanisms if they cause harm.

Alison Walters, director of consumer finance at the FCA, said: "CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy.

"This review will give us a clear picture of how the market is working and galvanise the further actions that are needed."

The SRA regulates around 9,000 law firms in England and Wales.

Aileen Armstrong, SRA executive director, strategy, innovation & external affairs, said: "When they work well, claims management services can benefit consumers. But we are concerned about poor practices and behaviours that are not looking after consumers' best interest.

"We will work closely with the FCA on this important review. This is a cross-sectoral problem that requires joined-up solutions."

The FCA said it will publish further information on the review by mid-May.

A joint taskforce was announced in March to tackle poor handling of motor finance claims by some claims management companies and law firms.

By Vicky Shaw, Press Association Personal Finance Correspondent

Press Association: Finance

source: PA

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