The FCA’s Strategic Vision for Claims Management Companies: 2024-2026
The Financial Conduct Authority has outlined its supervisory strategy for Claims Management Companies (CMCs) through 2026, highlighting key areas of concern and setting clear expectations for the industry. Since taking over regulation in April 2019, the FCA has observed a significant transformation in the sector, with lead generators now representing more than half of all CMCs.
Current State of the Industry
The FCA’s recent assessment reveals both progress and persistent challenges. Through three major initiatives examining unregulated claims, client money handling, and lead generation practices, the regulator has identified several critical areas requiring attention:
- 26 CMCs were evaluated for the ‘halo effect’ in unregulated claims, with most ceasing such activities
- Client money handling reviews led to improved standards, with 80% of historic client money now repaid
- Lead generation assessment of 30 CMCs found 90% non-compliant with CMCOB 2.2 requirements
Priority Areas for Supervision
Service Standards
The FCA will scrutinize how CMCs investigate claim merits before pursuit, particularly focusing on firms with high complaint volumes but low uphold rates at the Financial Ombudsman Service.
Personal Injury Claims
Special attention will be paid to marketing literature and lead generation due diligence in personal injury claims, ensuring compliance with Consumer Duty requirements and clear differentiation between regulated and unregulated activities.
Lead Generation
The regulator is considering modifications to the annual CMC001 report to better monitor lead generation activities and ensure proper data handling.
Key Compliance Requirements
Marketing and Advertising
CMCs must ensure all promotional materials are clear, fair, and not misleading, adhering to CMCOB 2 and CMCOB 3 standards. Recent concerns have centered on housing disrepair and motor finance claims advertising.
Customer Data Protection
Firms must implement robust due diligence processes when accepting leads from third parties, ensuring lawful and transparent data processing.
Service Quality
CMCs are expected to provide meaningful pre-contract engagement, conduct thorough claim investigations, and maintain professional cooperation with regulated firms.
Motor Finance Complaints
New rules introduced in December 2024 (PS24/18) extend response times for motor finance complaints until December 2025. CMCs must clearly communicate these changes to customers and avoid misleading advertising about potential refunds.
Regulatory Reporting Requirements
The FCA has noted concerns about CMCs failing to register principal users on RegData, resulting in overdue returns. Senior managers are responsible for ensuring timely and accurate regulatory reporting compliance.
Need Support with Regulatory Compliance?
Ensuring compliance with FCA regulations requires expertise and attention to detail. For professional guidance on meeting these regulatory requirements and implementing effective compliance systems, contact our team for specialized support.
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