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DISRUPTION BREEDS INNOVATION P21


No. 1650 | The Voice of Financial Advisers


Hundreds of CMCs shed regulatory permissions


by Rachel Mortimer


Almost a third of claims management companies that requested temporary permissions or were granted full authorisation from the regulator last year have since relinquished their permissions or had them revoked. In response to a freedom of information request submitted by Financial Adviser, the Financial Conduct Authority confirmed at least 280 companies had temporary permission for claims management and no longer do, or had been granted authorisation for a claims management permission, but no longer has permission. According to data provided by


the FCA, 952 CMCs sought temporary permissions last year when it took over regulation. It means 29 per cent have


since either relinquished their temporary permissions or authorisation, or have had them refused or revoked by the FCA. The FCA assumed control of


claims management regulation in April last year, taking over from the Claims Management Regulator, and took its first action against a company in December in the form of a £70,000 fine. In February, the watchdog


revealed it had refused to authorise a CMC amid concerns about how defined benefit file reviews were checked. Keith Richards, chief


executive of the Personal Finance Society, said the end of payment protection insurance complaints, which provided a steady stream of revenue for CMCs, could have served as a catalyst for many businesses leaving the industry. Mr Richards said: “The rigour


of FCA regulation, which is more demanding than previous regimes for CMCs, could also be


a factor contributing towards the reduction in the number of CMCs having permissions.” In January the PFS embarked


on a campaign to collect evidence of poor practice in the sector, information which Mr Richards said the body continues to pass to the FCA. Some of the allegations of


malpractice flagged to the PFS included CMCs issuing “blanket calls for cash” and escalating complaints to the Financial Ombudsman Service, despite advisers proving the client had received suitable advice. Mr Richards said “aggressive


marketing practices” and a lack of transparency over charges and alternative methods for making a compliant had been identified by the FCA as issues with some CMCs. Since the FCA took over


claims management regulation last year it has warned the sector on unacceptable advertising, while barring a company over conflict of interest concerns and warning that low uphold rates could work against companies when it comes to authorisation. The FCA has also asked CMCs


to record all client calls, a move the PFS has previously said should make it “relatively simple” to establish if a CMC has strayed beyond its permissions. But with advisers not getting


involved with PPI – a staple of CMC complaints – the financial advice sector has not had too much attention from CMCs. Mr Richards explained:


“Since the Retail Distribution Review, the advice sector as a whole has seen higher standards in terms of advice given, as evidenced by the FCA’s 2017 suitability review and the Fos’s statistics showing that less than half of 1 per cent of complaints relate to regulated advisers. “As a result, the advice sector


has not received as much CMC attention.”


Simon Evans, chief executive


of trade body the Alliance of Claims Companies, agreed the deadline for PPI claims in August last year and an increasingly complex regulatory landscape would have seen companies leave the industry. Mr Evans said: “It’s been a challenge and certainly a different world for firms [under the FCA] and, perhaps for many


smaller firms in the market, they may have felt the compliance challenge and higher costs, alongside the declining income, was not commercially viable.” Mr Evans said the trade body welcomed any action by the FCA to “stamp out” poor practice that did not meet the regulatory threshold.


Email: rachel.mortimer@ft.com


BEWARE GOVT CLAWBACK P16


SEND US YOUR COMMENTS: FA.LETTERS@ FT.COM


JULY 23 2020


NEWS P1-15


COMMENT P16-19


IN DEPTH P21-28


BETTER


BUSINESS P29-30


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