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.