With FCA regulation looming, how many CMC’s past history will prompt them to head for the exit?
The countdown to a new era of regulation for claims management companies has begun with the FCA making it very clear about its aims to drive up standards of industry conduct and boost consumer protection. In order to achieve FCA authorisation CMCs are required to be “trusted providers of high quality, good value services that help people pursue legitimate claims for redress.”
Firms must register for temporary permissions by the 31st March 2019 while companies who are already regulated by the FCA will need to apply for a variation of permission to add claims management as a permission. All CMC’s will be bound to the regulator’s rules which include the Senior Managers and Certification Regime due to be introduced in December 2019, meaning at least once a year, CMCs will need to make sure that the individuals performing Senior Management Functions and Certification Functions are ‘fit and proper’ to do their jobs.
Consequently the increase in regulation will inevitably result in a number of CMC’s exiting the market due to various factors including cost, inability to deliver on the required conduct rules or demonstrate compliance with past rules. This was demonstrated when the FCA took over regulation of the payday lending industry and the case of Wonga who gained full authorisation in 2016 but had previously entered into a “Voluntary Application for Imposition of Requirements” in 2014 which meant the lender had to pay compensation of over £2.6m to around 45,000 customers for unfair and misleading debt collection practices which took place between October 2008 and November 2010.
Therefore if an issue is raised which involves a CMC, it is entirely feasible that the FCA will review the past conduct of the company in question, which could be an unappealing prospect for a number of company directors living in the UK and abroad. Our research has identified a number of ‘rotten apples’ within the industry so will be watching with interest over the next few months.