The UK’s Financial Conduct Authority (FCA) has released new rules requiring claims management companies (CMCs) ensure their advertsing does not mislead potential customers.
Since the FCA took over the regulation of CMCs in April, it has reviewed more than 200 CMC adverts in multiple formats of media and found ‘widespread poor-practice’.
As a result, it has implemented new rules in relation to financial promotions issued by CMCs to ensure information is fair, clear, and not misleading.
These rules include CMCs identify themselves as a claim’s management company, and they state if a claim can be made to a statutory ombudsman / compensation scheme without using a CMC and without incurring a fee.
Finally, CMCs most include information relating to fees which the customer might have to pay if a firm uses the term ‘no win, no fee’ or a term with similar meaning.
These changes are aimed at ensuring consumers make an informed decision on whether using a CMC.
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said, “Many CMCs play a significant role in helping consumers to secure compensation. But CMCs using misleading, unclear and unfair advertising practices to get business is completely unacceptable. We won’t hesitate to take action where we consider that customers are being misled or otherwise treated unfairly by poor advertising.
“Firms should also understand that we will take their compliance with our rules on financial promotions into account when considering applications for full authorisation.”
The regulator monitored adverts on social media and websites. Some of the examples of bad practice the FCA found include failing to identify themselves as a CMC, not stating customer could use a statutory ombudsman or statutory compensation scheme without paying a fee, and giving consumers an impression they would get a better outcome from using a CMC.
Certain CMCs also used the term ‘no win no fee’ but did not disclose fees the customer needed to pay, only showing use cases where compensation was very high and way above average, and putting important information in small fonts and in difficult to see places.
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