UK financial watchdog cracks down on ‘excessive’ claim management fees
The UK’s financial watchdog is putting a stop to claim management firms charging excessive fees to consumers owed compensation.
From today the Financial Conduct Authority (FCA) will ensure that the maximum amount consumers can be charged will depend on how much compensation they receive.
Under the new rules if consumers receive a redress amount below £1,500, for instance, they can only be charged a maximum of 30 per cent of their claim. If someone receives a payout greater than £50,000 they can only be charged 15 per cent of the total value of their claim.
The changes are expected to save consumers £9.6m a year according to the FCA. Claim Management Companies (CMCs) will also be required to tell consumers how fees will be calculated before they enter into a contract and make sure that they are aware of free routes to seek redress.
“Our rules protect consumers from losing a significant amount of their compensation in excessive fees, particularly when there are ways for them to make claims without incurring any fees,” said Sheldon Mills, the executive director of consumers and competition at the FCA.
“The changes are part of our ongoing work to drive a fundamental shift in industry mindset so we can stop consumer harm before it happens, and to ensure more consistent standards of protection,” Mills added.
According to the FCA the cap will apply to most claims where a consumer is awarded monetary compensation from a financial services firm, either directly from a firm, via the Financial Ombudsman Service or from the Financial Services Compensation Scheme if a firm has gone bust. The rule changes will not affect fees for managing PPI claims which are already capped at 20 per cent.
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