The regulator launched a consultation yesterday which seeks comments from the wider profession on a number of issues to do with the change.
The document, ‘Claims management companies: recovering the costs of regulation and the Financial Ombudsman Service’, sets out the potential costs and logistics of the new arrangements.
It read: “We estimate that setting up and delivering the claims management regulatory regime will cost us £16.8m up to and including 2020/21.
“We will have to recover this amount from CMCs.
“When we set up regulatory regimes that bring new entities into our scope, we can sometimes defer recovery of the project costs until we have a substantial body of fee payers in place to share the charges.
“However, the claims management industry is undergoing considerable change and this uncertainty limits our ability to defer recovery of costs.”
The FCA said it hoped to recoup £7.1m through “periodic fees in 2019/20”, which is around 42% of the total, with the balance to be “spread over subsequent years.”
It added: “We normally invoice firms between July and September in a given year, but adopting this approach for CMCs would enable firms to register and operate under the TP regime, and then potentially leave the FCA’s regulatory remit or cease trading without contributing any fees.
“It could be difficult or impossible to recover fees from firms which no longer exist or which have left the FCA’s remit.
“We therefore propose to collect the 2019/20 fees in advance, at the time firms register for TP.
“This will ensure that project costs are not imposed disproportionately on authorised firms further down the line.”
The regulator also revealed claims management companies, so-called ‘ambulance chasers’, would not be subject to funding the Financial Services Compensation Scheme (FSCS).
Instead it said its “proposed new rules” for the firms would “help protect client money if it is held by CMCs and introduce new requirements to help ensure a smooth wind down if a CMC closes.”
The document left room for reconsideration of the position if there was “evidence of significant consumer harm.”
Consultation responses must be submitted by 22 October and a policy document is due to be issued in December.