Brits will keep thousands of pounds more compensation from financial firms under new rules that cap how much claims companies can charge.
When consumers are owed cash from a financial services company, they can normally make a claim themselves for free.
However, some find the process tricky - so claims management companies (CMCs) exist to handle claims on their behalf, for a fee.
CMCs also alert consumers to claims they might otherwise be unaware of.
The issue is that CMC fees can be very high - often up to half of the value of the entire claim.
Now the Financial Conduct Authority (FCA) regulator has brought in caps on how much CMCs can charge consumers.
People will now be charged variable fees depending on the size of their claim.
The FCA thinks this will save consumers £9.6million a year, or thousands of pounds each.
For example, for claims of below £1,500 consumers can only be charged a maximum of 30% of their claim, or £420, whichever is lower.
CMCs can only charge 28% of the value of claims between £1,500 and £9,999, capped at £2,500.
For redress amounts between £10,000 and £24,999, there is a maximum fee of 25%, or £5,000.
Claims between £25,000 and £49,999 can be charged up to 20%, or no more than £7,500.
Finally, claims of more than £50,000 have fees capped at 15%, or up to £10,000.
The rules came in yesterday.
The cap will apply to most claims where a consumer is awarded cash from a financial services firm.
It applies if consumers get compensation directly from a firm, via the Financial Ombudsman Service (Ombudsman Service) or from the Financial Services Compensation Scheme if a firm has gone out of business.
The FCA has also brought in rules that CMCs must also disclose key information to consumers before entering a contract.
This includes giving more detail about how fees will be calculated and making sure consumers know about how to make a claim for free.
FCA executive director of consumers and competition Sheldon Mills said: "Our rules protect consumers from losing a significant amount of their compensation in excessive fees, particularly when there are ways for them to make claims without incurring any fees.
"The changes are part of our ongoing work to drive a fundamental shift in industry mindset so we can stop consumer harm before it happens, and to ensure more consistent standards of protection."
However, all the new rules only apply to new claims brought after March 1, 2022. Old claims are unaffected by the price caps.
The FCA began regulating CMCs in April 2019.
Since then around 25% of CMCs have stopped trading.
