Consumers could save nearly £10m a year in claims management company (CMCs) fees as the regulator considers a price cap on the fees they charge for financial products.
The Financial Conduct Authority took over the regulation of CMCs, which handle PPI and payday loans, from the Ministry of Justice in April 2019.
The watchdog has previously slammed their “poor understanding of, and sometimes attitude to, their regulatory obligations”.
Currently some customers pay fees of more than 40 per cent of the redress they receive but the FCA’s new proposals published today would mean CMCs could not charge more than 15-30 per cent.
The proposals will also see CMCs have to disclose key information, including giving consumers more information about how the fees are calculated.
Aside from PPI, which already has a 20 per cent cap on fees, CMCs also manage packaged bank accounts, loans, savings and investments, and pensions.
“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.
“We estimate that the proposed cap on fees could save consumers around £9.6m a year.”
The FCA’s open consultation closes on 21 April.