Claims management companies must raise advertising standards, says FCA

23 Aug 2019 11:01 AM

Claims management companies (CMCs) must do more to ensure their promotions do not mislead potential customers according to the Financial Conduct Authority (FCA). Since the FCA took over regulation of CMCs on 1 April 2019 it has reviewed over 200 CMC adverts in various media and found widespread poor-practice in CMCs.

The FCA has introduced a number of new rules in relation to financial promotions issued by CMCs to ensure that CMCs provide information to consumers that is fair, clear and not misleading. These rules require CMC firms to:

These rules are designed to help consumers make an informed choice whether to use the services of a CMC.

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.’

The FCA has reviewed all kinds of CMCs’ financial promotions including website pages and social media. Examples of bad practice include that firms:

The FCA has been taking action on the back of these findings, including:

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.

Notes to editors

  1. FCA Glossary definition of a financial promotion: ‘an invitation or inducement to engage in investment activity or to engage in claims management activity’.
  2. Link to rules: CMCOB 3.
  3. Find out more information about the FCA.