The Financial Conduct Authority (FCA) wants to ban claims management companies (CMCs) with relevant connection to Financial Services Compensation Scheme (FSCS) claims from managing them, essentially eradicating the so-called practice of CMC ‘phoenixing’.
“Claims management phoenixing is when an individual connected with a wound-up FS firm reappears in connection with a claims management company,” explained the FCA, “and in doing so seeks to benefit from the former FS firm’s poor conduct by carrying on claims management activities against it.”
The regulator has launched a consultation outlining its proposed measures aimed at addressing the practice. It will run until June 21.
“Consumers should be able to choose to use a CMC to help them claim compensation from the FSCS,” asserted FCA executive director of consumers and competition Sheldon Mills.
“But paying someone to provide help who is connected with the firm that caused the consumer’s loss is wrong, particularly where the firm had a responsibility before winding up to help its customers to obtain compensation.”
Mills said the watchdog’s proposals are designed to put an end to claims management phoenixing and, in turn, increase consumer trust and confidence in financial services firms, CMCs, and the redress system.