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FCA to bill claims managers for cost of regulation

The FCA has confirmed that the cost of regulating claims management companies will fall on the firms themselves as it sets out its plans to recover fees from the sector.

The watchdog has been given responsibility for regulating CMCs as of April next year, superseding the Claims Management Regulator.

In a consultation paper this morning, the FCA estimates regulating the sector will cost it around £16.8m from when it takes over until 2020/21.

Because of the deadline on payment protection insurance claims that comes into force from August next year, the FCA says it is worried some claims firms will exit the market before they have a chance to pay their fees.

Therefore, it will collect nearly half of the amount it needs, £7.1m, in 2019/20, and collect these fees in advance when claims firms apply for their permissions with the FCA.

The regulator is also proposing having lower application fees for smaller CMCs, with bills set to be £1,200 for those with a turnover below £1m and £10,000 for those with a turnover above £1m.

CMCs should also pay the same case fees as other firms to the Financial Ombudsman Service, the FCA suggests, with CMCs having to report business information by the end of February each year so their contribution to the general FOS levy can be calculated.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Firms are generally quick to refer to the Ombudsmen instead of trying to settle disputes. If firms had to pay, there wouldn’t be so much stess on the ombudsmen and on investors.

  2. It’s a step in the right direction. The next should be:-

    1. a minimum qualifications benchmark, in line with that required for advisers,

    2. fines for attempted fraud in the form of complaints found to be based on a tissue of lies and

    3. a charge for complaints via a CMC which are rejected by the FOS.

    • @Julian Stevens

      I agree with the thrust of your comment but point 2 is not nearly strong enough! Revocation of permission should be automatic and consideration of referral to the police depending on precise circumstances. Only when honesty and integrity can be taken as read will this aspect of FS be ‘fit and proper’.

  3. I never expected them to do other than invoice the firms who they are regulating (or should that be overseeing), why would this not be the case?

    Be interesting to see how many try to do this from
    Overseas in some way, to try and circumvent the system

  4. My experience is that firms generally do not rush to push complaints towards FOS.

    They inform people of their referral rights, (as they required to do) but always have mechanisms in place to review customer concerns prior to a FOS referral.

    • What? CMC firms? Most CMC’s routinely refer any rejected complaint to the FOS, for the simple reason that doing so costs neither them or their client anything and, should the complaint land on the desk of (for them) the “right” adjudicator, it’ll be upheld.

      Let us not forget the case of that woman who complained against a mortgage broker(not an investment adviser) who, by having obtained for her funds that, without advice, she then invested in something that went down the pan, he [the mortgage broker] was responsible, on the grounds that he had made it possible for her to do so.

      I recall another case upheld by the FOS of a SIPP holder who, either without or against (I can’t remember which) advice from the SIPP adviser, invested in something that went bad, again on the grounds that by having recommended that particular SIPP, he had made it possible for the client to invest in something flaky, so he [the SIPP adviser] was responsible for the loss.

      To my knowledge, neither of those cases involved a CMC, but both verdicts demonstrate the fact that whereas one adjudicator may reject a complaint, another might well uphold it.

      CMC’s are well aware of such cases and are therefore highly likely to try their luck. Why wouldn’t they and how can any regulator stop them doing so other than by imposing a charge (or a fine) for any case referred to but ultimately rejected by the FOS, particularly if the complaint is judged to be based on false statements?

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