Britain’s Financial Conduct Authority (FCA) has started regulating claims management companies in a crackdown on misconduct.

Companies in England, Scotland and Wales must show they meet minimum standards and will need to apply for authorisation under changes introduced following a government review

“The new regime has consumer protection and claims management companies’ professionalism at its heart,” FCA Executive Director of Supervision – Retail and Authorisations Jonathan Davidson said. “It will mean that consumers will be protected from claims management cowboys and get a better deal.”

Requirements include steps to avoid encouraging customers to make fraudulent, frivolous or vexatious claims, and obligations to clearly explain fees.

Customers will receive a document summarising services provided before signing a contract and will be advised about free alternatives such as the national Financial Ombudsman Service or Financial Services Compensation Scheme.

Phone call recordings will be retained for a year to reduce the chance of high-pressure sales techniques and to help resolve customer complaints.

UK claims management companies have been particularly active in payment protection insurance, as well as personal injury, industrial injuries and housing disrepair.

“Many play an important role in helping to secure compensation for customers, including for those who otherwise might not make a claim,” Mr Davidson said.