Today's Budget: DAC Beachcroft Reaction
Published On: 16 March 2016
Regulation of claims management companies will move to Financial Conduct Authority.
In his Budget today, Chancellor of the Exchequer George Osborne announced that regulation of Claims Management Companies (CMCs) will pass from the Ministry of Justice to the Financial Conduct Authority (FCA).
DAC Beachcroft regulatory partner Mathew Rutter commented: "The FCA's regulatory regime will undoubtedly be much more rigorous for CMCs. The FCA will have a very wide range of powers available to it, both against CMCs and those who run them, including powers to impose unlimited fines and to bar individuals from running CMCs. The FCA has shown in the past that it is not shy in using the powers that it is given.
"The FCA is likely to be interested not just in activities that might give rise to consumer detriment, but also in whether the market for claims management services operates effectively in the best interests of consumers."
Peter Allchorne, motor partner at DAC Beachcroft, commented: "Tougher regulation is step one in tackling CMC behaviour. Step two will be to address the need to cap fees that CMCs can charge in all claims, including personal injury claims, in line with the current proposals to do so for PPI/packaged bank account claims."
Mathew Rutter added: "As well as making detailed rules, the FCA relies on its core Principles which all firms must follow, such as the requirement to treat customers fairly. So CMCs are likely to be required not just to follow the letter of any rules, but to ensure that, whatever they do, they deliver appropriate outcomes for their customers. They are likely to face significantly increased compliance costs as a result of this move."