FCA Urges Claims Managers To Be Flexible During Crisis

By Najiyya Budaly
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Law360, London (May 4, 2020, 12:12 PM BST) -- Claims management companies should give financial businesses a "reasonable amount of extra time" to respond to customer complaints about wrongly sold products amid the upheaval created by the COVID-19 pandemic, the Financial Conduct Authority has said.

The City watchdog said on Friday that it expects claims managers to allow banks and insurers more time to resolve complaints with a consumer before they escalate them to the Financial Ombudsman Service. A finance company has eight weeks to respond to complaints from consumers about products they believe have been missold or services they are unhappy with.

But the FCA said that claims managers, which can represent consumers against finance companies, should give those businesses extra time to issue a final responses to complaints. Businesses are reducing staff and concentrating on simply keeping afloat during the coronavirus crisis, the regulator added.

"When considering what is a reasonable amount of time for a firm to provide a final response, we will consider the current operational challenges firms face, and expect [claims management companies] to do the same, unless they identify and can show a particular urgency in the individual complaint and circumstances of the complainant."

Claims managers, or CMCs, can escalate a consumer's complaint to the Financial Ombudsman if the individual is not happy with the bank's response or if they do not receive one within eight weeks.

But the FCA said that the Ombudsman Service is aware that lenders and other finance companies are struggling to keep on top of their workload during the pandemic.

The Ombudsman will take an approach that "will be in the best interests of CMCs' customers," the FCA said. This could include returning a complaint to the finance business and asking them to discuss ways to resolve the matter directly with the claims manager.

"We expect CMCs to cooperate with the Ombudsman Service in this and play their part by acting professionally and reasonably," the City regulator said.

The CMC sector specializes in making lucrative claims on behalf of consumers, such as those for missold payment protection insurance. The FCA took over supervision of more than a thousand claims management companies from the government in 2019.

The earlier regulator was shut down, having struggled to stamp out widespread misconduct among claims companies, including aggressive sales tactics. The authority has the power to force registered companies to change their business practices, strip them of authorization or fine them if it finds that they are not complying with rules to protect consumers.

Claims management companies made billions of pounds from the banking sector's payment protection insurance scandal. The deadline for making complaints about wrongly sold PPI cover passed last year, leaving the sector looking for the next big earner. 

--Additional reporting by Joanne Faulkner. Editing by Ed Harris.

For a reprint of this article, please contact reprints@law360.com.

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