The focus is now turning to regulation of excessive charges by CMCs. The new Consultation Paper (CP21/01) sets out the FCA's proposals to address consumer harm in the CMC market by restricting the fees that can be charged to a consumer by a CMC in relation to a claim about a non-PPI financial product or service. Fees on PPI related claims are already capped at 20%, and the FCA has no plans to change that.
The proposed fee cap will apply on non-PPI claims that yield redress in relation to these products and services where the claims are within the redress system. Where CMC fees are too high, those fees can prevent consumer redress from being effective in putting the consumer back in the position they would have been in had they not suffered any harm. Where the proposed cap does not apply, the FCA require charges to be no more than reasonable.
The cap has two components, a maximum % rate of charge and a maximum total fee. The cap on rate of charge ranges from 30% for lower value redress below £1,500, to 15% for higher value redress of £50,000 and above. The cap on the total fee charged ranges from £420 for lower value redress below £1,500, to £10,000 for higher value redress of £50,000 and above. On any one claim the total fee to the consumer must not exceed the lower of the maximum percentage rate and the maximum total fee. See Table 6 in Chapter 4 of the CP for more details.
The CP also sets out proposals to improve the way that CMCs managing claims about financial products and services disclose key information to consumers at the pre-contract stage. The aim here is to help consumers make better-informed choices about using CMC services by reminding them that there are alternative (free) options available. The FCA acknowledge in the CP that CMCs can save consumers time and effort and give them confidence in their claim, reducing worry. They also recognise the wider societal role that CMCs play, helping to raise awareness that routes to redress for consumer harm may be available. However, the FCA also states that it doesn't consider that using a CMC will lead to a more favourable decision, or yield more redress, on any given claim.
The consultation is open for responses until 21 April 2021.
