CMC fury at footing £16.8m cost of FCA regulation

Claims management company (CMC) First4Lawyers has hit out at the FCA after the regulator revealed this week CMC’s could be billed an extra £16.8m to cover the cost of regulation.

The FCA will begin regulating CMCs in England, Wales and Scotland from 1 April 2019, and estimated it will cost £16.8m up to and including 2020/21.

In a consultation paper released this week, the regulator stated it plans to recover £7.1m collectively from CMCs in the first year to cover this cost, with the remainder spread over several years.

The FCA stated it was demanding a high proportion of the fee in the first year to ensure CMCs exiting the market next year pay a fair share of the cost.

But First4Lawyers director of operations Andy Kay said he was unhappy that the bill would still largely fall on the CMCs remaining next year.

He said: “We have already voiced concerns about the FCA’s ‘one size fits all’ approach to regulating CMCs.

“This is yet another example of the government not listening to reason and getting it wrong again, and calls into question why they are introducing FCA regulation so late in the day.”

General insurers

The FCA earlier this year put forward tough new rules over how CMCs will be regulated from next year.

This will include highlighting to customers any free alternatives to using the CMC, such as ombudsmen schemes, in marketing material and pre-contract disclosures.

And Kay added that the burden of regulation should also fall on general insurers.

He said: “What’s more the insurance sector, who promote and manage claims services to and on behalf of innocent third parties which, by definition, falls outside of normal insurance mediation activities, seemingly won’t face any fees nor will they face the same regulation.

“Amidst all the noise from insurers about the activities of CMCs and claimant lawyers, it is often forgotten that they do more claims management than most.

“We have long held the view that general insurers, specifically motor insurers, should be subjected to the same regulatory burden and be required to obtain separate authorisation to carry out CMC activities.

“The Government and FCA need to demonstrate that they understand how the claims management sector works and introduce a funding system that is fair for all, rather than a regime which will disproportionately hit successful, but law abiding, ethical businesses.”

The FCA has stated that as with any consultation, it will consider all submissions as part of this process.