CMCOB 4.1 Application and purpose
1This chapter applies to a firm in relation to regulated claims management activities other than seeking out, referrals and identification of claims or potential claims.
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Timeline guidance1This chapter applies to a firm in relation to regulated claims management activities other than seeking out, referrals and identification of claims or potential claims.
1A firm must provide summary information (see CMCOB 4.2.2R) to a customer in accordance with this section before entering into an agreement with the customer that relates to regulated claims management activity.
1The firm must provide the summary information:
in a single page document, which contains only the summary information;
in a durable medium; and
in plain and intelligible language.
The summary information is:
a brief description of the services that the firm will provide under the agreement (see CMCOB 4.2.8R);
a brief description of the steps that the customer will need to take in respect of the claim;
a brief description of how the firm will keep the customer updated on the progress of the claim;
a fee illustration or estimate, and explanation (see CMCOB 4.2.5R);
a brief description of the customer’s right to cancel the agreement (see CMCOB 2.1.12R(2)(a)); and
a brief description of:
the customer’s right to terminate the agreement; and
any fees that may be payable by the customer to the firm if the customer terminates the agreement (see CMCOB 2.1.12R(2)(b) and CMCOB 2.1.12R(4));
if the claim is of a sort which may be made by the customer to a statutory ombudsman or a statutory compensation scheme, without using the services of the firm and without incurring a fee, a statement to the effect that:
the customer is not required to use the services of a firm which carries on regulated claims management activity to pursue their claim; and
it is possible for the customer to present the claim themselves for free, either to the person against whom they wish to complain or to the statutory ombudsman or the statutory compensation scheme; and
if the firm is aware that the person against whom the claim is to be made is a member of, or subject to, an alternative dispute resolution scheme (other than an ombudsman or a scheme of a sort mentioned in (g)), a statement to the effect that it is possible for the customer to present the claim themselves to that alternative dispute resolution scheme.
1The guidance at CMCOB 3.2.8G also applies in respect of CMCOB 4.2.2R(2)(g).
1The requirement at CMCOB 4.2.2R(2)(b) to describe the steps a customer will need to take in respect of a claim will generally include, but are not limited to, providing documentation relevant to the claim (such as background information) and completing the necessary paperwork.
1The firm must explain the basis on which it would calculate its fee, and provide an illustration or estimate of that fee.
Where the fee would be payable by reference to the amount recovered for the customer, the firm must provide an illustration of what its fee would be by reference to each of the following amounts recovered for the customer:
£1,000;
£3,000; and
£10,000.
For the purposes of (2), the “amount recovered for the customer” means the amount paid or payable by the person against or about whom the claim would be made, ignoring any set-off or netting against any sum owed or payable by the customer to that person.
Where the firm’s fee is not ascertainable as in (2), but is instead dependent on factors which cannot be known in advance (for example, where the firm charges an hourly rate), the firm must provide an estimate calculated by reference to:
The illustration or estimate must be accompanied:
where (2) applies, by a statement that the fee illustration is not to be taken as an estimate of the amount likely to be recovered for the customer;
where (4) applies, an explanation of how the estimate has been calculated; and
a statement to the effect that the fee that the customer will have to pay may be more than or less than the illustration or estimate.
Where the fee is a fixed amount, the firm may indicate that the fee is a fixed amount and not an estimate.
1If the firm is unable to provide a precise figure under CMCOB 4.2.5R(4), it may provide an estimate in the form of a range. Firms should be able to demonstrate the basis for their calculations under CMCOB 4.2.5R(4), and should ensure that their estimates are accurate.
Estimates and illustrations should be shown inclusive of VAT. VAT-exclusive fees should only be shown if the customer pays no VAT or can recover VAT, or the firm is not subject to VAT.
1Before entering into an agreement with the customer that relates to regulated claims management activity, the firm must give the customer objective information, in a durable medium, to assist the customer to reach a decision as to whether to pursue the claim.
The information given under (1) must include information on:
the risks and costs involved in making the claim, in particular (where relevant) the possibility of not recovering any money but becoming liable for costs; and
the possibility, in the case of legal action, of attending Court and giving evidence.
[Note:CAPR CSR 11a]
1Before entering into an agreement with the customer that relates to regulated claims management activity, the firm must also give the customer information, in a durable medium, on:
the services that will be provided under the agreement, including but not limited to:
the actions the firm will take to ascertain the basis and merits of the claim, including (where relevant):
the nature of any advice to be provided by the firm including:
the actions the firm will take to present and pursue the claim;
the actions the firm will take and the advice it will give when the claim is completed (that is, when it is either rejected or successful, whether in whole or in part);
the person who will provide those services;
the terms under which and the conditions on which those services will be provided;
any charge the firm makes;
whether the firm’s fees are:
calculated on the gross or net amount of the customer’s damages, compensation or monies in settlement of a claim; and
a clear explanation of how this will affect the damages, compensation or settlement monies that the customer will actually receive;
any referral fee paid by the firm to, or other financial arrangement with, any other person in respect of the introduction of the customer to the firm;
any steps that the customer is likely to have to take in respect of the claim;
any costs that the customer may have to pay, in relation to repayments of a loan taken out for the purchase of a legal expenses insurance policy, or any similar purpose, and whether the customer may be liable to pay any shortfall in recoverable costs or premiums from the person against whom the claim is to be made;
the documentation likely to be needed to pursue the claim;
any relationship between the firm and any solicitor or panel of solicitors to whom the firm might refer the customer or from whom the firm might commission services in relation to the customer;
the procedures to follow if the customer wishes to make a complaint about the firm;
how the customer may cancel or terminate the contract and what the consequences of cancellation and termination are, including the reimbursement of any costs paid during the cancellation period and any charges for work completed after that cancellation period (see CMCOB 2.1.12R);
the nature and frequency of updates that the firm will give the customer on the progress of the claim;
the Financial Ombudsman Scheme or any other Ombudsman scheme to which the firm is subject.
[Note: in part, CAPR CSR 11(b)–(k)]
1In addition to the matters in CMCOB 4.2.7R and 4.2.8R, the firm must also inform the customer, in a durable medium, that:
if the customer has outstanding liabilities with the person against whom the claim is to be made:
in the case of pension related claims:
if the customer is subject to or proposing any of the processes or arrangements listed at CMCOB 4.3.1R(6)(a) to (f) that:
any damages, compensation or settlement monies might, in certain circumstances, be off-set against the customer’s outstanding debts; and
the customer will, where necessary need to pay the firm’s fees from funds which are not subject to the processes or arrangements listed at CMCOB 4.3.1R(6)(a) to (f).
1Examples of outstanding liabilities in CMCOB 4.2.9R(1) include:
late repayments due under a credit agreement for financial services claims; or
the training costs paid by an employer for the employee which become repayable by the employee in accordance with the conditions of a contract.
Outstanding liabilities would not include arranged debts such as a mortgage account.
1When a firm gives information to a customer as required by CMCOB 4.2.1R, CMCOB 4.2.7R, CMCOB 4.2.8R and CMCOB 4.2.9R, the firm must accompany the information with:
the name, postal address and other contact details of the firm; and
the reference number under which the firm appears in the Financial Services Register.
[Note: in part, CAPR CSR 11(l)]
1The information required by CMCOB 4.2.7R, CMCOB 4.2.8R and CMCOB 4.2.9R cannot be given in the same document as the information required by CMCOB 4.2.2R. However, it is permissible for all of this information to be provided in attachments to the same email or enclosures to the same letter.
When giving the information referred to in CMCOB 4.2.11R, firms are reminded of their obligations under GEN 4.3.1R.
1 Firms are reminded that SYSC 10.1.7R requires them to maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest (as defined in SYSC 10.1.3R) from adversely affecting the interests of their customers. If those arrangements are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a customer will be prevented, SYSC 10.1.8R requires the firm to disclose the general nature or sources of conflicts of interest, or both, and the steps taken to mitigate those risks, before undertaking business for the customer. The FCA would expect firms to do so at the same time as they provide the information required by CMCOB 4.2.
1Before entering into an agreement with the customer that relates to regulated claims management activity, the firm must:
take reasonable steps to:
ascertain whether the customer has other methods for pursuing the claim, and if so:
ensure that the customer understands that those methods are available to them;
seek confirmation in writing from the customer that the customer does not wish to use those methods, and the customer’s reasons for not wishing to do so;
record the customer’s confirmation and reasons; and
draw the customer’s attention to the information provided under CMCOB 4.2.2R(2)(g) and (h), if that information is relevant to the claim;
[Note: in part, CAPR CSR 10]
make it clear to the customer that the customer may seek further advice or look for another person to assist the customer with the claim, subject to any time limits within which a claim must be made; and
[Note:CAPR CSR 13]
take reasonable steps to ensure that the customer understands the agreement;
[Note: in part, CAPR CSR 14
ask the customer whether they have outstanding liabilities with the person against whom the claim is to be made and explain that if they do:
that any damages, compensation or settlement monies might, in certain circumstances, be off-set against those outstanding liabilities; and
the customer will, where necessary, need to pay the firm’s fees from their own funds;
in the case of pension related claims explain:
ask the customer if they, whether in Great Britain or in another jurisdiction:
have been declared bankrupt;
are subject to a bankruptcy petition;
are subject to an individual voluntary arrangement;
have proposed an individual voluntary arrangement which is yet to be approved or rejected by creditors;
are subject to a debt relief order; or
have any other similar process or arrangement to those listed in (a) to (e) including but not limited to sequestration; and
if so, explain that any damages, compensation or settlement monies might, in certain circumstances be off-set against the customer’s outstanding debts; and that the customer will, where necessary, need to pay the firm’s fees from funds that are not subject to the processes or arrangements listed above at (a) to (f).
record the customer’s response to questions (4) and (6) and where the customer does not know the answer, advise them to check.
1For the purposes of CMCOB 4.3.1R(1)(a) a firm will have complied with its obligations if it has provided relevant examples of potential alternative methods of pursuing the claim and has asked the customer whether any such methods are available to them.
A customer should be treated as having other methods for pursuing a claim for the purposes of CMCOB 4.3.1R(1) if, for example:
the claim is for personal injury and the customer has legal expenses cover under a contract of insurance relating to their car or home and that cover includes legal advice, assistance and representation; or
the customer is entitled to legal advice, assistance and representation by virtue of their membership of a trade union.
Where the customer does have other methods for pursuing a claim, the firm should explore whether the customer has investigated whether they might pursue the claim through those methods (for instance, by using any advice, assistance and representation available under a contract of insurance or through their trade union membership).
Where a customer is unable to confirm whether they have other methods for pursuing the claim or is unaware of whether they have suitable cover in place, the firm should advise the customer to check whether they have such cover in place and inform the customer that it is possible to pursue a claim through such alternative arrangements if they are in place.
Firms are reminded that DISP 1.2.1R(4) requires firms to provide information to eligible complainants, in a clear, comprehensible and easily accessible way, about the Financial Ombudsman Service (including the Financial Ombudsman Service’s website address):
on the firm’s website, where one exists; and
if applicable, in the general conditions of the firm’s contract with the eligible complainant.
1The firm may need to take additional steps under CMCOB 4.3.1R(3) to ensure that the customer understands the agreement where the customer is one whom the firm understands or reasonably suspects to be vulnerable.
Customers who have mental health difficulties or mental capacity limitations may fall into the category of particularly vulnerable customers.