FCA Vows to Clamp Down on Harmful Practices in Civil Claims Sector

The Financial Conduct Authority (FCA) is now in the process of considering stricter compensation requirements for law firms that harm consumers and  launched a wider review of the claims management market after concerns that some firms are failing consumers. Specific concerns were raised about the handling of housing disrepair claims.

The review will examine poor practices such as aggressive marketing, misleading adverts and unfair exit fees. The FCA is also concerned that some consumers are being signed up without clear consent or proper explanations, including through social media adverts.

The review will examine:

• Whether consumers receive fair value, including competition on price and quality, and whether existing price caps are still fit for purpose, especially where free-to-use redress mechanisms exist.

• Financial incentives, including fee structures, funding and insurance arrangements, and whether these create conflicts of interest and/or lead to poor conduct and outcomes.

• Whether the full end-to-end consumer journey, including lead generation, marketing and advertising, delivers good consumer outcomes.

• Whether different approaches across different regulatory regimes affects firm behaviour and if some firms are failing to secure the appropriate permissions.

The FCA warned: 'We expect full, prompt and open cooperation from all parties we engage in the review. We, with our regulatory and enforcement partners, will take robust action if this is not forthcoming. Where we believe legislative change is needed, we will make recommendations to government, or relevant bodies, including whether CMCs and law firms should be subject to stronger compensation mechanisms if they cause harm.'

Forbes will be closely following this review and will report further on its progress.