(Adds more detail)
LONDON, Sept 20 (Reuters) - Britain’s finance watchdog on Thursday proposed new rules to address concerns over the conduct of claims management companies (CMCs), which pursue compensation on behalf of consumers in exchange for a slice of any payouts.
CMCs submit and manage claims for consumers who feel they have been mistreated by businesses across a range of industries. Though instrumental in winning compensation for many victims of scandals, such as the mis-selling of payment protection insurance (PPI), the sector has not been without its detractors.
CMCs will come under the remit of the Financial Conduct Authority (FCA) from April 2019, ahead of which the regulator is consulting on rules it has proposed after instances of misconduct and poor governance in the industry.
“An independent review into CMCs found evidence of harm to customers, including harassment, aggressive sales tactics and business practices that reward the firm at the expense of its customers,” the FCA said in its consultation document.
Its proposals seek to reduce such conduct and ensure individuals are held accountable for their actions and decisions, it added.
The new rules would make individuals in a small number of roles within CMCs subject to its approval and enable assessment of whether senior managers took reasonable action to prevent things going wrong.
Its suggestions are in line with the Senior Managers Regime (SMR) brought in by the FCA after the financial crisis to ensure senior figures in financial businesses are held accountable for what happens in their companies.
The SMR will apply to CMCs from December 2019, the FCA said. It also proposed introducing conduct standards for nearly everyone working in a CMC.
Recently, CMCs have been seen as a key driver in a rise in the number of claims against payday lenders suchg as Wonga, which collapsed into administration this year, citing a sharp rise in complaints against the company.
Reporting by Emma Rumney Editing by David Goodman