Claims Management
FCA Authorisation
Expert regulatory support for claims management companies seeking FCA authorisation for regulated claims management activities.
Claims Management Regulation
Claims management companies (CMCs) provide services including seeking out, referring, or identifying potential claimants, or providing advice or services in relation to claims.
Since April 2019, the FCA has regulated CMCs, imposing strict requirements on marketing, fees, and client treatment to address historic consumer harm.
FCA authorisation requires demonstrating clear fee structures, appropriate qualifications, compliant marketing, and robust consumer protection.
Typical Services
- Personal injury claims management
- Financial services mis-selling claims
- Housing disrepair and criminal injury claims
- Employment tribunal representation
How We Support Claims Management Companies
- Permission and perimeter scoping across claim types and activities
- Whether a referral or lead generation model is itself inside the perimeter
- Fee model tested against the applicable cap, including third party charges
- Charging timing reviewed against the no upfront fee restriction
- Client money account structure and segregation design
- Senior Manager identification and fitness and propriety evidence
- Connect application and regulatory business plan
- Merit assessment framework built to CMCOB 2.1.9R with the record fields the FCA looks for
- CMCOB 3 pre-contract disclosure pack covering fees, cancellation rights and free alternatives
- Lead source due diligence and financial promotions approval process
- Client money procedures and fee deduction audit trail
- DISP complaints handling and the claims management complaints return
- FCA query management and responses
- Senior Manager interview preparation
- Merit assessment file review with claim success rate tracked as core MI
- Disclosure and fee cap adherence review
- Client money reconciliation review
- Support during FCA information requests and supervisory visits
Key Regulatory Requirements
Fee Restrictions
- Fee caps on certain claims types
- Clear fee disclosure upfront
- No fee before the claim is submitted
- Transparent charging structures
Marketing Standards
- Prohibition on cold calling (PI claims)
- Clear and not misleading promotions
- No pressure selling tactics
- Compliant lead generation
Consumer Protection
- Client money safeguarding
- Complaints handling procedures
- Vulnerable customer identification
- Fair treatment framework
Financial Resources
- Base capital: £5,000 (CMCs)
- Professional Indemnity Insurance
- Client money protections
- Financial projections
Required FCA Permissions
Claims management permissions are granted by claim type as well as by activity. A firm needs the right combination of both.
Seeking Out, Referring and Identifying Claims
Applies where the firm generates or introduces potential claimants, including lead generation and referral models, rather than pursuing the claim itself.
- Lead source due diligence
- Marketing provenance records
- Perimeter position for referral models
- Introducer oversight
Advising, Investigating and Representing
Covers helping a customer understand whether they have a claim, gathering evidence and assessing merits, and submitting or negotiating the claim with the respondent firm or the Financial Ombudsman Service.
- Documented merit assessment
- Evidence gathering standards
- Customer communication records
- Representation scope agreed in writing
Financial Services Claims
Mis-sold PPI, unsuitable investment advice, unfair charges and motor finance commission complaints. Attracts the financial services fee caps.
- Fee cap mapped to charging model
- No charge before claim submission
- Total charges including third parties
- Claim success rate MI
Personal Injury Claims
Accident and injury claims, operating alongside the legal profession, the courts and the MoJ fixed cost regime.
- No fee before the customer has a legal services agreement
- Interface with legal services providers
- Court and fixed cost regime awareness
- Claimant communication standards
Housing Disrepair, Employment and Criminal Injuries Claims
Separate categories covering claims against landlords and housing providers, employment tribunal matters, and claims to the criminal injuries compensation scheme.
- Category specific permission applied for
- Merit assessment per category
- Category appropriate disclosure
- Staff competence by claim type
Client Money (CMCOB 5)
Needed where the firm will receive settlement funds on the customer's behalf and deduct its fee before remitting the balance.
- Designated segregated client accounts
- Reconciliation regime
- Fee deduction audit trail from settlement to remittance
- Client money adequacy at the gateway
Permissions & scope
Which regulated activities the firm will carry on, and the exact permissions that follow from them. Everything downstream is scoped to this, so a permission asked for loosely is a business plan and a set of controls built against the wrong thing.
Business model
What the firm does, who for, and how it earns. The FCA tests whether the model is viable and whether the permissions being requested actually match it, rather than reading the two documents separately.
Governance & SM&CR
Who is accountable for what, and whether they are fit and proper for it. Senior manager responsibilities have to be mapped to named people and evidenced, not asserted in a paragraph.
Policies & controls
The procedures that make the model work in practice, and evidence they are followed rather than filed. A policy the firm cannot show operating is the most common gap at the gateway.
Financial resources
Capital, projections and an orderly wind-down. The figures have to agree with the business model rather than sit beside it, and the wind-down plan has to be costed.
Common Authorisation Challenges
The FCA gateway for claims management firms tests the substance of the merit assessment and fee model, not just the wording of a policy.
Evidencing a Real Merit Assessment
CMCOB 2.1.9R requires an assessment of reasonable prospects of success before entering an agreement. The FCA challenges applicants whose process amounts to proceeding with everything, and expects a documented method covering the factual basis, the applicable regulatory framework, and the decision to proceed or decline. CMCOB 2.1.2R means pursuing a claim the firm knows or ought to know has no reasonable basis is itself a breach.
Getting the Fee Cap Architecture Right
Applicants must show how the PPI cap of 20 per cent plus VAT, the sliding scale for other financial services claims and the separate 15 per cent plus VAT cap map onto their charging model, and that the cap is applied to total charges including any levied by introduced third parties. Ancillary and assessment fees that push the customer's total above the cap are a common defect.
The No Upfront Fee Restriction Versus the Cashflow Model
Financial services CMCs cannot charge before the claim is submitted, and personal injury CMCs cannot charge before the customer has entered an agreement with a legal services provider. Applicants whose financial projections assume early fee income need to rebuild the model before the FCA will accept it.
Disclosure That Tells the Customer They Do Not Need You
CMCOB 3 requires the firm to disclose the customer's right to pursue the claim directly at no cost, and the availability of free alternatives such as the Financial Ombudsman Service, prominently and before commitment. Applicants routinely submit packs where this sits buried inside terms and conditions.
Lead Generation and Marketing Provenance
The FCA scrutinises where leads come from. A CMC that buys leads generated through unlawful cold calling is at risk itself, and a lead generator may be carrying on a regulated activity in its own right depending on its interaction with the customer. Applicants must evidence due diligence over every acquisition channel, and communications promoting claims management activity are financial promotions under section 21 FSMA.
A Tightened Gateway in a Hot Claim Market
Claims management is one of the sectors where the FCA has raised gateway standards, and it is monitoring CMC conduct closely in the motor finance commission claims environment that followed the Supreme Court ruling. Applications entering that market attract additional scrutiny of both marketing and merit assessment.
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Learn more →Ready to Get Authorised?
Speak with our claims management regulatory specialists about building a merit assessment framework and fee model that will withstand FCA scrutiny.
Phone: 0330 133 0811
Email: contact@memaconsultants.com