The government has taken huge steps in making the Financial Conduct Authority (FCA) take on the responsibility for regulating claims management companies.
Announced as part of Last week’s budget, the Chancellor of the Exchequer said that a tougher regulatory regime for claims management firms would be introduced, as the current Claims Management Regulatory Unit lacked the regulatory toolkit necessary to minimise loss and maximise its fulfilment.
This followed a review of the claims management industry which recommended a cap on the amount these companies can charge.
‘The government is clamping down on the rogue claims management companies that provide bad service and bombard customers with nuisance calls,’ it was heard yesterday.
Osborne went on to say:
‘The new regime will be tougher and will ensure claims management company managers are held personally accountable for the actions of their businesses.’
The Treasury said the FCA would be put in charge of the new regulation.
‘In order to ensure that the new regulatory regime is implemented effectively, the government intends to transfer responsibility for regulating claims management companies.’
The move to regulate claims management firms follows a National Audit Office report into financial mis-selling redress, which discovered claims management firms made between £3.5 billion and £5 billion from the total £22 billion paid out to victims of payment protection insurance mis-selling.
The claims management regulation unit was established in 2007, and was originally only intended to be an interim measure.
Turnover from personal injury claims in the sector was £309.7m in 2015, compared with £238.2m in 2014 and £354.1m in 2013.
Around 900 claims management companies were operating in the personal injury market by the end of December, the smallest the sector has been since regulation began in 2007.
This action will take effect in 2017.