Restricted FCA regulation on CMC activity may yet leave consumers exposed to unscrupulous behaviour
On 1st April 2019 the FCA will become the regulator for claims management companies established or serving customers in England, Wales and Scotland. Firms will need to notify their intention to register for Temporary Permission and will then need to go through the FCA’s authorisation process. New firms will need to decide whether to begin their authorisation process with the Claims Management Regulator or wait to submit an application to the FCA after April 2019.
However the current FCA proposals apply to Claims Management Companies only and not legal practitioners who carry out claims management work, who will presumably continue to be regulated by the Solicitors Regulation Authority instead. In the HM Treasury consultation: Claims management regulation: consultation on secondary regulations, which closed on 1st June, “legal practitioners” who are currently exempt from claims management regulation, would remain outside the remit of the FCA rules. This effectively could create dual regulation which would cause consumer confusion and leaves one to wonder how it can help the FCA’s Chief Executive, Andrew Bailey in his quest for “high quality, good value service(s) that can truly help consumers”.
The HM Treasury draft legislation provides various categories of organisation that are excluded from FCA regulation, including claims management conducted by legal practitioners Yet for the FCA to be truly effective, claims management conducted by legal practitioners should not be exempt and claims management as a function should be regulated and supervised by the FCA instead. Law firms should not be able to avoid FCA regulation by exploiting the exclusion for claims management activity conducted by legal practitioners.
If this is allowed, the opportunities for gaming the system are significant and we could see existing CMCs teaming up with a lawyer to gain the exemption. Everything would continue as it does now, with a lawyer as the front man and CMCs doing all the work in the background, meaning CMCs continue to work behind a legal practitioner and the problems the regulator is actually currently seeking to address to ensure consumers are protected and treated fairly, go unchecked.
The consultation closes on 3rd August 2018