The UK Financial Conduct Authority (FCA) has published a Dear CEO Letter addressed to claims management companies (CMCs), in particular those that may fall within scope of the proposed industry-wide motor finance redress scheme. This follows the FCA's separate letter of 31 July highlighting concerns around financial promotions that may breach the requirements of the Claims Management: Conduct of Business sourcebook (CMCOB) and the consumer duty.
The FCA's latest letter to CMCs sets out the key issues it is monitoring and its expectations from firms participating in the proposed redress scheme on behalf of consumers once it comes into effect. Key issues include: (i) pre-contract disclosure of customers' ability to pursue claims independently, with firms expected to review past cases to ensure customers were adequately informed and, where they were not, to remedy the situation; (ii) multiple representation, where firms should cease acting if they discover a customer has multiple representatives; (iii) contract termination, with CMCs expected to avoid excessive termination fees for customers who choose to exit contracts to participate directly in the redress scheme; and (iv) representing customers participating in the redress scheme, where CMCs should not request excessive or unnecessary information from respondent firms or place undue burden on them, with mutual cooperation between CMCs and respondent firms expected. The FCA warns that failure to act in accordance with the expectations of the Dear CEO letter may result in enforcement.
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