Mar 21 – Fair Value for Money
Under the Financial Guidance and Claims Act 2018, Parliament transferred the regulation of Claims Management Companies (CMCs) to the FCA and gave it a duty to make rules about CMC fees for claims relating to financial products and services.
FCA’s research has found that conditions in the market allow CMCs to charge fees well above the value they provide to individual consumers. CMC fees are usually calculated as a percentage of the redress paid on a claim and charged on a no-win-no-fee basis. The FCA wants to protect consumers who have suffered harm and are owed redress from paying too much money for claims management services through excessive charges.
FCA is currently consulting on the introduction of a cap to fee charges, for non PPI claims, based upon the amount of redress that a customer receives for a single claim. The fee ceiling is to be set at £10,000 with lower ceilings for smaller claims. The proposals are that the cap will apply to all claims that could be taken through the statutory redress system (which includes the Financial Ombudsman Service and the Financial Services Compensation Scheme) even if they are pursued some other way e.g. through court.
The new rules will come into force three months after they are made for contracts that are entered into both prior to and after the rules come into force for all fees charged after that date, but should be this Autumn.
CMCs will be required to ensure that customers understand the other methods through which they can make a claim and a standalone signed statement from customers, giving their reasons for choosing to claim through a CMC, will be required.
These changes will help to ensure that customers who claim for redress through a CMC receive good value for the service provided. We only hope that the Solicitors Regulation Authority, who regulates many of the firms responsible for the data subject access requests in the mortgage sector, will follow suit to ensure that the differences in the two regimes do not lead to consumer detriment.
Lucy Lewis, AMI,
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