Claims management companies (CMCs) might be launching one last push for PPI compensation claims but they also face a fresh advertising clampdown following “widespread” poor practice in the industry.
As life after PPI – and the Terminator ads – looms, CMCs will be turning their sights on other areas, including accident claims, telecoms, and energy saving firms, with others eyeing up data breach claims.
However, new rules from the Financial Conduct Authority mean claims firms will have to identify themselves as CMCs in all promotions, and prominently state if a claim can alternatively be made to an ombudsman or compensation scheme without requiring their input.
The FCA will also require CMCs to include “prominent” information about upfront fees and termination fees the customer may have to pay.
Since taking over regulation of the sector in April, the FCA has reviewed more than 200 ads in various media and concluded that many companies are failing to help consumers make an informed choice.
Some gave the impression that consumers would get a better outcome if they used the CMC, while others used terms like ‘no win no fee’ but provided little information about what people would actually pay.
The FCA has already written to companies to remind them of its financial promotion rules, and has used formal banning powers where a CMC appeared to be using a celebrity endorsement without the individual’s permission.
In a statement issued last week, the regulator said that firms flouting rules on promotions would be unlikely to meet the threshold conditions for continuing authorisation.
FCA executive director Jonathan Davidson said those CMCs using misleading, unclear and unfair advertising practices to get business was “completely unacceptable”.
He added: “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.”
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