The countdown is on and Claims Management Companies (CMCs) are fast on their way to new era in which their main focus will be company standards and consumer protection. From April 1st 2019, the Financial Conduct Authority (FCA) will be taking over from the Claims Management Regulator for all conduct within the claims process for registered CMCs.
The aim of the FCA’s take over is to have trusted CMCs, with good value and high quality services for their clients. They are going to be focusing on three main areas.
- Regulations – improve the client’s confidence in using CMCs by prioritising high qualities of conduct.
- CMCs – abiding by the FCA rules to help customers meet their needs.
- Customers – to give more confidence to customers that the service they will be choosing will be at a competitive value for money.
There will be rules and requirements that the CMCs will have to follow. They will also have to ensure that they are ready for the changes within their business.
Whether a company has been regulated for a long time, or is applying for regulated activities for the first time, there are a lot of changes that they will need to adhere to. CMCs in Scotland have not had to apply to become regulated before, however, they need to be from April 1st.
Other firms that may have to apply to become regulated for the first time are those who soley handle Section 75 of the Consumer Credit Act 1974 claims.
The Financial Conduct Authority, will not just accept a CMC straight off, the CMC will have to register for temporary permission. To be able to register with the FCA for a temporary permission a claims company will have to already be regulated by the Claims management Regulator (CMR).
For companies to be able to register for their temporary permissions, there are various steps that need to be followed:
- Gathering Information
- A CMC will need to show their Firm Reference Number (FRN), only if they are already authorised by the FCA.
- Their CMR authorisation number (only if authorised by the CMR).
- Company details, including; contact details, website address, trading names.
- Logging into the Connect system
- Firstly they would need to enter personal details (name, email address, tel. number)
- Create a PIN number
- Create a password
- Complete the Captcha word validation
- Introductory information
- A CMC will need to be able to confirm they are eligible before any proceedings.
- Conform they have a FRN. if the CMC is not already authorised a FRN will be created.
- Application contact details
- Anything that shows on this pre-populated page will need to be changed if there are any wrong details automatically entered.
- Firms Details
- If the CMC are already authorised by the FCA and they have entered their FRN, most of these fields will be auto populated.
- They will need to make sure that all website addresses and trading names are used for regulated claims management activities.
- Claims management temporary permission supplement
- Depending on the answer given by the CMC, some questions will change but this is a dynamic form.
- If the CMC is already authorised by the CMR their authorisation number will need to be provided on this form.
- The declaration will need to be read by the CMC carefully to make sure it has been understood. When making the registration it must be made by a trader of the CMC whos licence relates to a director or senior manager of the company.
- Submit a notification
- Once the CMC have completed all the sections they will then be able to submit a registration.
- An email will then be sent confirming a submission of their registration once the FCA has received it.
Claims management companies will have to confirm what activities they will be carrying out when registering. Activities can be anything from lead generation and advertising to representation of a client. They will also have to confirm in which sectors they will be working, for example; financial services, holding clients money or housing repair. By doing this the FCA will be able to confirm when the CMC can submit their application in order to get their full authorisation.
Once the FCA have registered temporary permission for a CMC, from April 1st they will be expected to comply with all FCA Standards. If such standards are not met by a CMC, they could face legal action. An enforcement investigation may be opened, which could lead to a financial penalty.
At first, the CMCs that have received a temporary permit will be able to carry on with any regulated activity across the sectors regulated by the FCA. However, if there are any specific concerns about a firm under their regulation, the FCA can limit the functions that a CMC can carry out. The FCA will be authorised to stop a claims management company holding clients monies and even stop them handling claims that cover certain sectors.
With the FCA taking over, companies will have to deal with a lot of change, just remember this is in the best interest of the customers wanting to claim.