Regulation of CMCs to cost £16.8m

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The cost of regulating claims management companies could be £16.8m with the bill falling on the firms themselves, according to the Financial Conduct Authority.

The FCA will assume responsibility for regulating CMCs serving customers in England, Wales and Scotland as of April next year, taking on the role from the Claims Management Regulator.

CMCs that are currently authorised by the Claims Management Regulator will not be automatically transferred to the FCA and firms will need to apply for reauthorisation from the watchdog.

In a consultation paper released on Tuesday, the financial services watchdog said regulating the sector will cost it around £16.8m from April 2019 until 2020/21.

The regulator said it plans to recover the costs directly from CMCs.

Due to the deadline on payment protection insurance claims that comes into force in August next year, the FCA said it is concerned some CMCs will exit the market before they pay their fees.

The watchdog said it plans to collect £7.1m in 2019/20, which is around 42% of the total, in advance when firms apply for authorisation from the FCA. The balance will be spread over subsequent years.

“We will have to recover this amount from CMCs. When we set up regulatory regimes that bring new entities into our scope, we can sometimes defer recovery of the project costs until we have a substantial body of fee payers in place to share the charges,” the FCA said.

“However, the claims management industry is undergoing considerable change and this uncertainty limits our ability to defer recovery of costs.”

The regulator is also proposing to lower application fees for smaller CMCs, with bills set to be £1,200 for those with a turnover below £1m and £10,000 for those with a turnover above £1m.

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