"CMCs using misleading, unclear and unfair advertising practices to get business is completely unacceptable."
Since the FCA took over regulation of CMCs on the 1st of April it says it has reviewed over 200 CMC adverts in various media and found "widespread poor-practice" in CMCs.
The FCA has introduced a number of new rules in relation to financial promotions issued by CMCs.
Firms must identify themselves as a claims management company and prominently state if a claim can be made to a statutory ombudsman or compensation scheme without using the services of the firm, and without paying a fee.
Firms will also be required to include prominent information relating to fees and termination fees which the customer may have to pay if a firm uses the term ‘no win, no fee’ or a term with similar meaning.
The FCA says its investigation found that firms often failed to state that customers could make a claim to a firm such as the Financial Ombudsman Service, instead giving the impression that they would get a better outcome if they use the services of the CMC.
Some firms are also failing to set out fees that the customer must pay and only include examples of case studies where the compensation provided to consumers is very high.
The FCA has warned that if firms continue to use poor promotions, "it is unlikely that they meet the Threshold Conditions for continuing authorisation".
Jonathan Davidson, executive director of supervision at the FCA, said: "Many CMCs play a significant role in helping consumers to secure compensation. But CMCs using misleading, unclear and unfair advertising practices to get business is completely unacceptable. We won’t hesitate to take action where we consider that customers are being misled or otherwise treated unfairly by poor advertising.
"Firms should also understand that we will take their compliance with our rules on financial promotions into account when considering applications for full authorisation."
