Many will have read the FCA’s Supervision Portfolio Letter published 26 October, in which the regulator highlighted its focus areas to CMC’s. The ‘Dear CEO’ letter addressed customer and market harms that the FCA continues to see across the Claims Management sector and its current supervisory strategy to July 2022. Their portfolio focus will be on the wind down of PPI Firms, the Personal Injury market (as the Whiplash Reforms take effect next spring) and the increase in complex high-value claims.
The ‘harms’ and risk areas are familiar, suggesting that Firms continue to grapple with the FCA’s expectations, or navigate the extended rulebook (often with unhelpful guidance).
CMC’s could be forgiven for expecting an open, collaborative, and advisory approach which is what most reference from their regulatory predecessor, the CMR. However, whilst some Firms are willing to challenge the FCA on its CMCOB 3 assertions, most seem extremely willing to comply.
What should CMC’s be doing NOW?
1. Review your Marketing
All financial promotions whether web, social, direct, indirect or third-party generated need to be reviewed prior to their publication and on a regular basis. All marketing must comply with the Claims Management Conduct of Business Sourcebook (CMCOB) Chapter 3.2. For those purely lead generating and Firms accepting leads from lead generators CMCOB 2.2 applies.
2. Review your One Page Service Summary (and Consumer Contract)
For those who enter customers into contract, a compulsory one-page service summary must be provided, ‘pre-contract’. The details required in this single page document are detailed clearly within CMCOB 4.2 (4.2.1 & 4.2.2). If your service summary falls short of these prescribed requirements, please contact us for assistance.
Terms of Business or Customer Agreements must comply with CMCOB 4.3 and the Consumer Rights Act 2015.
3. Consider how you display your Fee
Fees are a hot topic in CMC regulation and the FCA is clearly still concerned about how fee structures are explained to customers. You must ensure that your fees are set out in accordance with CMCOB 4.2.5, show a VAT inclusive price and state whether the fee is payable on the Net or Gross award.
(The Financial Guidance & Claims Act imposed an obligation on the FCA to consider a further fee cap across the financial products & services claims sector and the letter indicates that this is still under review. Any further fee caps will be consulted on).
4. Consider your Service Offering
The FCA wants to be satisfied that customers are receiving a good quality service from their chosen CMC. In their letter they cite poor advice, inadequate processes and ‘sub-standard representation’; reminding firms that they must have adequately skilled staff to undertake claims with due skill, care and diligence. They also reference poor quality claims being submitted and inadequate ‘basis of claim’ investigations in some cases. See the General Principles of CMCOB 2.1.
Firms should review the adequacy of their claims processing not only through their success rates and customer satisfaction ratings but also through their complaint data, FOS/FSCS uphold rates. Validity of claims featured in the FCA’s October 2019 Dear CEO Letter and continues to concern them a year on.
5. Check before re-marketing existing Client data
Just as the ICO publishes its first monetary penalty for a breach of the Claims Management Cold-calling Ban (21A PECR) the FCA warns Firms that are re-marketing to their existing data could breach GDPR/DPA and Privacy & Electronic Communications Regulations (PECR).
Before you undertake any new marketing campaigns, check the lawful basis for processing customer data. You can only rely on consent for certain types of marketing and where legitimate interest is relied upon, ensure you have completed an adequate assessment.
If you are concerned that you are not meeting the regulators expected standard, given their latest communication, please contact us for a review of your processes, marketing and customer engagement documents.
