AMI Senior Policy Adviser Stacy Penn discusses the Perception Gap in the protection market, in this article originally published in Moneyfacts…
In an unprecedented step the FCA has issued a Dear CEO letter to a sector of the market before they have completed the firm authorisation process. The issues with CMC’s have been expressed by advice firms of all types for many years now, with the capacity of the Ministry of Justice to deal with complaints limited by their scarce resources. However, the FCA is different in that it can mobilise significant resource where they see bad practice and potential consumer harm.
So the FCA has written to all those firms applying for authorisation so set out what they see as existing bad practice and warning all those running firms that they need to look at themselves and be sure they are not guilty of any of these practices.
The FCA has focussed on:-
- CMCs acting for their customers without getting their appropriate consent or completed letters of authority
- CMCs submitting letters of authority and claims in fictitious customer names
- there is no relationship between the customer and the financial service provider receiving the claim, and
- CMCs’ financial promotions do not comply with the rules
The FCA has stated that failure to comply with the rules could mean they remove a firm’s temporary permission or refuse to authorise it. They will look at a range of evidence including high levels of Financial Ombudsman Service uphold rates for complaints against the CMC or low levels of uphold rates for complaints submitted for their customers, as this may indicate the firm is not complying with FCA rules. The letter also has a section advising “Do not ignore this letter”, another first from my perspective.
An unusual step, but many in the industry will welcome CMC’s now being tasked with the same standards as advice firms. All we now need is those CMC’s hiding behind SRA authorisation to be similarly assessed.