It was no April Fools Day joke for claims management companies (CMCs) as the FCA assumed regulation of the industry on the first. But how are CMCs, who have never considered themselves as financial services, ensuring they meet FCA approval? Richard Whittington, Product Owner at Unicorn Training, takes a look.
Remember that accident you didn’t have when you sustained that injury you never got, which that cold caller said you could make a claim for? We’ve all had them.
From PPI to personal injury, until April CMCs could pop up at will to try to milk the opportunity of making some quick cash by latching on to the latest consumer concern. Package bank accounts, credit cards, mortgages, you name it and there was a cowboy CMC ready to claim compensation for you to get their cut.
You just didn’t always know how much of that compensation you would receive, the timeframe of the claim, whether you were paying unfairly high prices, that you had the right to go elsewhere for advice for free or even if you were bordering on committing fraud… basically all absolute FCA no-nos.
although CMCs have not seen themselves as financial services organisations, it is financial services specialists that can help
It meant well run, ethical CMCs were typically tarred with the same brush as the opportunists, and understandably they too were sick of it.
On 1 April, the FCA announced that more than 900 CMCs had registered for ‘temporary permission’ to continue operating while they go through the full authorisation process.
From what we have heard in the sector, CMCs are struggling with bringing staff up-to-speed with, in particular, the requirements around the FCA’s Principles for Businesses and the new Claims Management Conduct of Business (CMCOB) and that the extent of what required is an ongoing challenge.
So, although CMCs have not seen themselves as financial services organisations, it is financial services specialists that can help ensure their staff are competent, and the provider can meet and maintain FCA standards to gain full authorisation.
What the regulator wants
The FCA wants to see providers up their game in terms of the service they offer, making it high value, good quality and that it helps customers pursue legitimate claims of redress to the benefit of the public interest. The Financial Ombudsman is now responsible for resolving disputes between CMCs and the public too.
There are six regulated claim management activity sectors – financial services and products, personal injury, housing disrepair, specified benefit, criminal injury and employment – and across these the regulator is looking at three key areas.
- Customers – that customers are empowered and confident in choosing value-for-money services that are appropriate for their needs.
- Getting redress – that CMCs are able to do that fairly, not fraudulently or by being overly persuasive, making sure their marketing is clear and customers are directed to free ombudsman services.
- The regulation rules – promoting high standards, particularly around the professional conduct of staff and with a focus on protecting customers and improving public confidence in CMCs to provide a really good service.
And it doesn’t end there as in December, CMCs will join c.50,000 other regulated firms that must comply with the FCA’s Senior Managers and Certification Regime (SMCR).
Meeting the challenge
Any CMC now needs to be able to train their staff and ensure they are competent and confident on what their requirements are under the FCA regime. But these are all areas CMCs have barely had to give a second thought to legally, if not ethically.
Things like what the FCA is and its role, conduct risk, treating customers fairly, financial promotions, culture and ethics, the Client Assets Sourcebook (CASS), vulnerable customers, countering bribery and corruption, information security, GDPR, conflicts of interest, complaints handling, whistleblowing, fraud – this list is substantial.
For CMCs it is a potential training minefield. Where do you even start? But this is not something that fazes financial services solution providers like Unicorn.
We’ve been supporting and advising clients with topics like these for the last 30 years. Take SMCR for example, we already have a well-established suite of content, as part of our Governance, Risk and Compliance offering, that is being tailored and updated for CMCs. In addition, a new CMCOB course has been created, covering the code of business.
So whether someone is a senior manager or a claims handler, the resources are there for any individual who works in the sector to undertake the training relevant to them and to be able to evidence continuing professional development (CPD) and the level of competency they need to be able to continue to operate within the sector.
The regulatory claims management landscape will be unrecognisable by the end of 2019, with the overarching principle to educate and inspire staff at all levels to take personal responsibility for their actions to improve conduct across the business and drive up industry standards.
Well-run, ethical CMCs, that were already complying with FCA best practice and demanding accountability in the sector, are now getting the formal training and certification in place to continue operating and securing fair outcomes for customers.
But the cowboys? It’s now time for them to shape up or get out of town. Want to know more about how Unicorn can help you? Visit unicorntraining.com or get in touch at firstname.lastname@example.org or on 0800 055 6586.