Introduction
The Financial Conduct Authority (FCA) recently wrote to Claims Management Companies (CMCs) to outline its latest supervisory strategy for the coming years. The FCA reaffirmed its commitment to ensuring that CMCs operate as trusted providers of high-quality services. With a focus on consumer protection and industry standards, the strategy highlights key findings, priority areas, and expectations for the sector over the next two years.
Regulatory Landscape for CMCs
Since assuming regulatory authority over CMCs in 2019, the FCA has overseen a decline in the number of authorised firms, with lead generators now forming a significant part of the industry. As of May 2022, only 664 firms remained FCA-authorised for claims management services, down from over 3,000 in 2018. Despite this contraction, the FCA expects CMCs to uphold high standards of service, consumer fairness, and regulatory compliance.
Key Areas of Concern
Recent FCA reviews, including one in November 2023, found that some CMCs handling client money had ineffective reconciliation procedures, and annual audits of client accounts were inconsistently conducted. As a result:
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- A third of CMCs stopped handling client money due to compliance concerns.
- Those continuing to handle client money demonstrated higher compliance standards.
To ensure CMCs adhere to regulatory expectations, the FCA Handbook outlines key obligations under:
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- CMCOB (Claims Management: Conduct of Business) – Covers marketing practices, fee transparency, and service obligations.
- PRIN (Principles for Businesses) – Reinforces that firms must conduct business with integrity, due skill, and fairness.
- SYSC (Senior Management Arrangements, Systems, and Controls) – Defines accountability and governance expectations for senior managers.
- COBS (Conduct of Business Sourcebook) – Ensures fair customer treatment and financial promotions compliance.
Key FCA Priorities for CMCs
Over the next two years, the FCA will focus on:
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- Embedding Consumer Duty – Ensuring that firms act in the best interests of consumers.
- Service Standards – CMCs must thoroughly investigate claims and adhere to ethical business practices.
- Personal Injury Claims – Marketing materials and lead sourcing must meet compliance standards.
- Lead Generation – The FCA will explore enhancing transparency and compliance through regular data monitoring.
Ensuring Compliance: The Role of Senior Managers
The FCA holds senior managers accountable for regulatory adherence, with an emphasis on:
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- Misleading Advertising – Ensuring clear, fair, and non-misleading promotional content.
- Data Processing – Verifying lawful and transparent handling of customer data.
- Consumer Understanding – Providing plain-language information to help consumers make informed choices.
With temporary changes to motor finance complaint handling rules, the FCA expects CMCs to play an active role in educating consumers and ensuring marketing materials do not mislead.
A Call to Action
CMCs must act now to align their operations with FCA expectations. This is an opportunity to strengthen governance, enhance compliance, and rebuild consumer confidence. Firms that proactively address regulatory priorities will be better positioned for success in the evolving claims management landscape.
How Complyport Can Help
Complyport provides expert regulatory guidance to ensure that CMCs meet FCA compliance standards. We can support your firm with:
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- Regulatory Guidance: Expert advice on FCA expectations and compliance requirements.
- Ongoing Support: Ensuring continued compliance as regulations evolve.
- Compliance Documentation: Reviewing and updating policies and procedures, including drafting new policies as needed.
- Training: Providing staff training on regulatory best practices.
- Authorisation Applications: Assisting firms seeking FCA authorisation for claims management services.
For expert compliance assistance, contact Complyport today.
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