Financial compensation can be sought out in certain circumstances where a consumer has received poor or unlawful service and CMCs can be utilised to help with this. There is broad scope on what compensation can be awarded through these companies but they can help with a number of financial situations.
“This will see some consumers saving several thousand pounds on the fees they pay to CMCs.
“The cap will apply to all claims where a consumer is awarded monetary redress, apart from PPI claims which are already subject to a cap set by Parliament.
“As part of the proposals, CMCs will be required to disclose key information, such as giving consumers more information about how the fees they pay will be calculated and better signposting to the free alternative routes to redress available.
“This information must be disclosed to consumers before they enter into a contract, to help consumers make better-informed decisions about using CMC services.”
Sheldon Mills, an Executive Director of Consumers and Competition at the FCA, commented on the proposals: “We took over regulation of CMCs in April 2019, and have since been proactively supervising the sector.
“When working well, CMCs can provide useful services for consumers.
“However, consumers can experience harm when they do not understand the nature of the service CMCs provide and where they are charged excessive fees.
“The proposals we have announced today are designed to address this. We estimate that the proposed cap on fees could save consumers around £9.6million a year.”
The FCA went on to detail that, aside from PPI, the vast majority of financial services and products claims being managed by CMCs relate to four specific areas, which includes packaged bank accounts, loans, savings and investments and pensions.
PPI claims have a price cap of 20 percent of the redress paid to the consumer and this will not be changing moving forward.
A consultation on these proposals will now be considered up until April 21 2021.
Beyond this, the FCA will issue a policy statement in the Autumn and if a fee cap is confirmed, they will monitor its effects on the CMC market and the underlying consumers.
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