More than 900 CMCs have registered for 'temporary permission' to continue operating while they go through the FCA authorisation process.

Once authorised, the FCA has a range of tools and powers it can use if firms do not comply with the rules. This may involve requiring a firm to change its business practices (eg ensuring its communications with consumers are clear, fair and not misleading), imposing a financial penalty or refusing to authorise a firm if there is serious misconduct.

The new FCA regime aims to boost consumer protection and the professionalism of the sector by driving up standards in the industry. The FCA wants CMCs to be trusted providers of high quality, good value services that help consumers pursue legitimate claims for redress.

New FCA requirements will benefit consumers by ensuring that CMCs give people the information they need to make informed decisions. The new FCA requirements include:

• due diligence on lead generation and rules to prevent firms encouraging customers to make fraudulent, frivolous or vexatious claims or claims which have no good basis
• providing clear, upfront information to customers about the fees they charge and the services they will provide
• giving customers a summary document about the services they will provide before the customer signs a contract
• telling customers about free alternatives such as the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS), including in advertising
• recording and retaining customer telephone calls for a year after their final contact with a customer will reduce the chances of high pressure sales techniques and support robust resolution of customer complaints

Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:

'Today brings a new regime and rules for regulating the claims management industry. Many CMCs play an important role in helping to secure compensation for customers, including for those who otherwise might not make a claim. The new regime has consumer protection and CMC professionalism at its heart. It will mean that customers will be protected from claims management cowboys and get a better deal.'

If you're considering using a CMC, please refer to our page about using CMCs which has information about how to claim compensation (including for free yourself), what to expect from a CMC if you decide to use one, and how to check you are using an authorised CMC.

Andrew Stevens, a banking and financial services specialist at customer experience expert Quadient, said:

'Banks shouldn’t be lulled into a false sense of security by news that the FCA will begin regulating the sector. The tougher rules on how these companies deal with their customers is welcome, and an important step as the industry continues to grow, with CMCs amassing more than £6.2 billion between 2007 and 2017, according to a Ministry of Justice report. However, regulation doesn’t mean the banks should breathe a sigh of relief: CMCs will still work to identify a weakness in an industry, and attack it relentlessly.

'Numerous recent high-profile data breaches (many involving UK banks) and new regulations like GDPR could lead customers to bring legal action against an organisation that has not adequately protected their data. This demand for CMCs is not going to be outstripped by the FCA’s new regulations, and to avoid becoming easy prey, organisations need to learn the lessons of PPI and Payday Loans. Those that understand the demands of the GDPR and of the general public; that have a culture of treating data with the respect it deserves; and that can prove that they have taken the right action at the right time, will be best equipped to avoid giving CMCs an opening to exploit.'