The financial watchdog will begin regulating claims management companies from today in a bid to boost professionalism across the sector.
Over 900 CMCs have registered for temporary permission while they go through the FCA authorisation process.
CMCs will now need to meet and maintain a set of FCA standards.
This follows a 2016 independent review into regulation within the claims management sector.
CMCs must also provide due diligence on lead generation and rules to prevent firms encouraging customers to make fraudulent or frivolous claims.
The FCA’s continued focus on transparency of fees across various sectors in the industry will also come into play.
To meet minimum standards, claims management firms will need to prove they have been upfront with fees and charges and breakdown services they provide and the correlation to price.
Telephone calls with customers must also be recorded and retained for a year after final contact in a bid to quash pressure sales techniques.
FCA executive director of supervision, retail and authorisations Jonathan Davidson says: “The new regime has consumer protection and CMC professionalism at its heart. It will mean that customers will be protected from claims management cowboys and get a better deal.
“Many CMCs play an important role in helping to secure compensation for customers, including for those who otherwise might not make a claim.”