Claims management companies can expect to face disciplinary action from their new regulator if they do not match up to the new standards expected of them.

The Financial Conduct Authority assumes control of CMC regulation from April, with many predicting this could lead to a tougher regime than under the current Claims Management Regulator overseen by the Ministry of Justice.

Writing in the latest MASS Insight magazine, published by the Motor Accident Solicitors Society, FCA head of claims management regulation Gary Hunter insists there is no ‘set agenda’ for how CMCs will be handled, but the focus will be on protection and fair treatment of clients.

‘We want CMCs to be trusted providers of high-quality, good-value services that help people pursue legitimate claims for redress,’ says Hunter. ‘By improving standards and working with firms, we’ll help to improve trust in the industry, which may provide trust dividend to firms.’

Under the FCA, each claims management company will need one ‘permission’ for lead-generating activities, then further permissions if they want to advise a claimant, investigate a claim or represent a claimant.

All CMCs must register for temporary permission with the FCA by the end of March or stop regulated activities. They then have two periods until the end of July in which to register. The FCA has stated that it will carry over the rule that requires CMCs to make ‘reasonable enquiries’ to find out if there are other ways the customer can make their claim.

CMCs which generate and pass leads on to law firms will have to tell customers about any fees they receive from solicitors.

Writing in the same magazine, Paul Drabble, a partner at PI firm True Solicitors, suggests the intent behind changing the watchdog may be to ‘use the FCA to regulate this industry out of existence’. Drabble adds: ‘I have no doubt that where the FCA appears reluctant or afraid to take any meaningful regulatory action against the powerful financial institutions it regulates, this reluctance will not be extended to the CMCs it regulates.’