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The Financial Guidance and Claims Act (2018)

After months of negotiations, we welcome the Financial Guidance and Claims Act (2018), following the Financial Guidance and Claims Bill.


We have been following the progress of the Financial Guidance and Claims Bill as it progressed through Parliament, and now, after months of negotiations, we welcome the Financial Guidance and Claims Act (2018) (“the Act”).

Key components

The Act deals with the regulation of pensions advice, as well as the transfer of regulatory oversight of Claims Management Companies (“CMCs”). For the purposes of this update we will be focusing on the Part relevant to CMCs. The CMC section of the Act applies to Great Britain and therefore now encompasses CMCs in Scotland.

The Act makes amendments to the Financial Services and Markets Act 2000 (“FSMA”) and introduces additional measures to;

  • Include claims management activities as a regulated activity;
  • Make provision for the transfer of regulatory oversight for CMCs from the Ministry of Justice to the Financial Conduct Authority (“FCA”) allowing the FCA to implement those rules that it deems necessary to further regulate the CMC industry;
  • Introduce fee capping rules;
  • Create transitional arrangements in respect of PPI claims;
  • Introduce a ban on cold calling for CMC purposes without the express consent of the claimant (prior to the cold calling activity commencing); and
  • Require other regulators, such as the Solicitors Regulation Authority, to introduce measures for their own members to implement the terms of the Act.

The FCA as a regulator

Whilst the transfer of regulatory oversight to the FCA is positive in the sense of bringing scale and resource to the regulatory regime, the FCA has a lot of work to do to ensure that the new regime is fit for purpose. We understand that the FCA is likely to consult on the proposed regulatory framework shortly.

As set out in our previous update looking at the legislation when it was first introduced before Parliament as a Bill, including claims management activities within the scope of section 21 of FSMA sends a very clear message to those looking to flout the new rules. A contravention of section 21 constitutes a criminal offence with a convicted person facing the possibility of imprisonment.

The penalty guidelines provide for the following:

  • On summary conviction, imprisonment for up to six months and/or a fine up to the statutory maximum.
  • On conviction on indictment, imprisonment for up to two years and/or a fine.

What is perhaps disappointing is that Medical Reporting Organisations and Credit Hire Organisations were not included within this new regulatory regime. It remains our view that all those who engage in the provision of services to claimants in the pursuit of a claim should be brought under the one regulatory umbrella, to prevent dysfunctional behaviors and to avoid leaving open unregulated avenues of exploitation.

The ban on cold calling

The ban on cold calling is perhaps the most controversial element of the new Act and the prevarication over whether to keep it in or leave it out was such that observers might have be forgiven for thinking they were watching a legislative equivalent of the hokey cokey. We therefore welcome with some relief the inclusion of provisions within the Act to amend the Privacy and Electronic Communications (EC Directive) Regulations 2003.

The relevant amendments prohibit the use of a public electronic communications service to make unsolicited direct marketing calls about claims management activities without the express consent of the claimant, that consent having to be obtained prior to the commencement of marketing activities.

Whilst it is pleasing to see the Government tackle this nuisance, there are of course concerns in relation to how effective these provisions will be in actually stamping out cold calling activity. Most cold calling activities are undertaken from countries outside of the European Economic Area and thus outside the jurisdiction of UK and EU regulators, as a result of which they may not be effectively captured by the ban.

It is our view that unless the regulators take steps to punish those end users benefitting from cold calling activities, the ban will be difficult to enforce. READ FULL ARTICLE