The FCA will cap fees for Claims Management Firms at £10,000 from 1 March, it confirmed today.
A fee of £10,000 can be charged where compensation of £50,000 or more has been won by a CMC.
Fees are are also capped at lower compensation awards with a fee cap of £420 for compensation won of £1 to £1,499.
On an award of £10,000 to £24,999 a fee of up to £5,000 can be charged.
The maximum percentage fee that can be charged is 30%.
The new fee limits will apply for claims started on or after 1 March.
There has been growing concern that CMC fees were becoming excessive and the FCA has now confirmed limits to fees.
Even with the new caps, CMCs can charge 30% on an award up to £1,499, subject to a cap of £420.
The FCA has also reminded consumers that they can make claims for free and a CMC is not essential although consumers have a right to use a CMC if they wish. The FCA has also reminded consumers that they can make complaints about CMCs.
CMCs have increasingly been targeting investment and pension claims after the deadline for PPI claims passed, reducing a lucrative business stream.
CMCs must now be regulated by the FCA or certain legal professional bodies for claims covering PPI, payday loans, pensions and investments and claims where consumers purchased an item on a credit card and have suffered loss or damage. They can also handle claims for employment matters, including unfair dismissal, criminal injury, housing disrepair and some industrial injuries benefits.
The FCA announced the restrictions on fees and other guidance in a document published today, PS21/18.
In the document the FCA said: “To discharge our statutory duty and protect consumers from harm we are restricting CMC fees through a fee cap. We designed the cap with a view to securing an appropriate degree of protection against excessive charges. The degree of protection it provides allows for CMCs to continue delivering value to both individual customers and wider society while generally preventing fees that are higher than necessary to deliver that value.
“We are also enhancing the requirements for CMCs to give consumers important information in the pre-contract stage, and making some minor updates and clarifications to other rules for CMCs.”
FEES FOR USING CMCS
For claims started on or after 1 March 2022, the maximum fee will depend on the value of claims
How much you’re awarded
Maximum % you can be charged
Maximum fee you can be charged
£1 to £1,499
£1,500 to £9,999
£10,000 to £24,999
£25,000 to £49,999
CMCs regulated by the FCA must also follow regulatory guidelines including providing consumers with a 1-page summary of all the key information before they sign a contract, supplying a detailed breakdown of charges including examples and offering a 14-day cooling off period.