With fees eating up more than 40% of the payouts that some harmed consumers are due, the U.K.’s Financial Conduct Authority (FCA) is proposing to cap the fees that firms can charge for handling monetary redress claims.
The FCA issued proposals that would introduce a price cap on the fees that claims management companies (CMCs) can charge for securing redress in the financial sector.
These types of companies act as intermediaries between harmed customers and industry firms that are paying compensation for mis-selling and other forms of misconduct.
The regulator’s proposal would restrict the take of CMCs, depending on the size of the claim, and it would impose upfront fee disclosure requirements on such companies, among other measures.
“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,” said Sheldon Mills, executive director of consumers and competition at the FCA, in a release.
Mills said that the FCA estimates that the proposed cap on fees could save harmed consumers around £9.6 million per year.
The proposals are out for comment until April 21, with final rules expected by the fall.