Claims management companies will see registration fees increase by 400% when they come under the regulation of the Financial Conduct Authority next month, prompting fears that smaller firms will move into unregulated areas.
From the April 1, FCA will regulate the CMCs in the following sectors: personal injury, financial services and financial products, housing disrepair, specified benefit, criminal injury, and employment-related. Under the current registration system, under the Claims Management Regulator, CMCs have to pay a one-off application fee, which is currently fixed at £2000.
However, under the FCA, larger firms with a turnover of more than £1m, will be charged £10,000 for each application.
Speaking to POST's Pamela Kokoszka, BLM’s head of fraud Sarah Hill said she believes “genuine” CMCs will remain in the regulated areas, however, the “sharper” or more fraudulent companies will look to move into unregulated areas.
“What we will see as a result of the regulation is that some of the smaller CMCs will slip away and there will be greater consolidation among what I would determine to be genuine CMCs. As a result, you will get a greater sophistication in the market but fewer larger CMCs operating.
“At the sharper end of the market I am absolutely certain they will try to move into unregulated areas by masquerading as something else, creating something that they would perceive to be regulated by a less rigorous regulator.”
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