The Strongest And Best Firms Will Survive
The FCA have stated they expect that as a result of the fee cap “at least 16 firms for pension claims and savings and investment claims are expected to remain and make a margin of 10 per cent or more”.
In the face of the cap on CMC fees, some firms will cut corners to reduce costs, try to sell clients other services in order to top up the “loss” of fees, e.g. introductions to IFAs for advice on how to invest compensation, or even sell their client data to other firms.
It’s also possible we could also see some consolidation or mergers between firms to try and reduce their operational costs and increase economies of scale. We are already seeing many firms cancelling their FCA permissions and leaving the industry ahead of tightening regulation in the sector.
Impact On Consumers
The reduction in numbers of CMC firms is potentially bad for consumers because generally lower competition leads to higher profit margins but this negative impact is now offset by the fee cap. Those firms that reduce their level of service in response to the cap in fees will not survive as complaints are upheld against their poor service. Many firms will leave the CMC industry as their high marketing costs to find potential customers are unsustainable.
ACL Consultancy Is Well Placed
We believe that the remaining CMCs in the industry are those with sustainable, low cost and low fee business models. ACL Consultancy have operated successfully for 10 years and have had one of the lowest flat fees in the industry since 2017. They have demonstrated that high fees are unjustified and don’t equate to better service or better outcomes for consumers.
We agree with the FCA that consumers will be better served by the surviving CMC firms by paying lower fees for a proper, professional claims management service.
Act Promptly To Avoid Delay And Frustration
However, one problem remains: If you are a consumer already signed up to a CMC that may go bust, what will happen to your claim? If you claim has already been submitted to the FOS or the FSCS, you will likely be told you don’t need to appoint a CMC unless you need to e.g. you have a complex series of claims, don’t have the time to deal with the claim yourself or simply want a claims manager to do it for you.
If your claim has not been submitted to the FOS or FSCS for compensation then you will be left in limbo – your claim will not progress and you could run out of time.
It is therefore important that you act promptly if your CMC informs you it has decided to cease operations so you avoid further hassle and delay.
If you are concerned about the news and would like to discuss matters, please call us on 0333 358 0074 today. We’ll be happy to explain your options.