The UK’s Financial Conduct Authority (FCA) has directed claims management companies (CMCs) to be providers of high quality services that benefit the public interest ahead of taking over their regulation in April next year.
All CMCs catering to clients in England, Scotland, and Wales will fall under the remit of the watchdog.
In order to continue operations, CMCs must abide by the minimum standards required to operate or else will be restricted from managing claims, the regulator said.
Under the new rule, CMCs are also mandated to record and retain customer telephone calls for one year after their final contact.
CMCs can apply for a temporary permission in January 2019. The permission would enable the firms to continue operations until authorisation by the FCA.
With the new rule, the regulator aims to empower consumers and improve public confidence in CMCs.
FCA executive director of supervision – retail and authorisations Jonathan Davidson said: “We’re ready to take over regulation on 1 April 2019. The new regime aims to drive up standards in a sector whose reputation has been tarnished by some companies engaging in high pressure selling and by failing to provide clear information on the fees they charge.
“The new rules will ensure firms are transparent about their estimated fees before the customer signs on the dotted line, and notify customers of free statutory ombudsmen or compensation schemes. It’s vital that customers have the information they need to make informed decisions. We will take action against those that break the rules.”