FCA acts on dubious claims management ads
27 Aug 2019
The Financial Conduct Authority (FCA) is clamping down on advertising by claims management companies after a review found widespread poor practice
27 Aug 2019
Since the FCA took over regulation of claims management companies (CMCs) on 1 April 2019 it has reviewed over 200 claims management companies’ adverts in various media and found a number of examples of misleading and unclear information.
These included failing to identify themselves as a claims management company or explain to consumers that it is possible to make a claim without using its services and without a paying a fee.
There were also instances where adverts appeared to give consumers the impression that they would get a better outcome if they use the services of the claims management company, and which only included examples of case studies where the compensation provided to consumers is very high, even though the average amount received by consumers is considerably lower. In addition, important information was sometimes presented in small font or in a position that is difficult to see, when it should in fact appear prominently in a promotion.
The regulator has now introduced a number of new rules. These require claims management companies to identify themselves as a claims management company, and to state prominently if a claim can be made to a statutory ombudsman/compensation scheme instead without incurring a fee.
Adverts must also include prominent information relating to fees and termination fees which the customer may have to pay if a firm uses the term ‘no win, no fee’ or a term with similar meaning.
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.’
If the FCA concludes that firms have used very poor promotions, it is unlikely that they meet the threshold conditions for continuing authorisation. When the FCA reaches this determination, it will also set out what actions the firm needs to take and by when to avoid having to close down.