Claims management companies, or CMCs, will have to abide by stricter rules when dealing with customers after the Financial Conduct Authority takes over regulating them in 2019.
The FCA said on June 5 that before any contract with customers is agreed companies must provide potential customers with an overview of their fees and details of their services and will be obliged to highlight any free alternative to their services, such as financial ombudsmen schemes.
Claims management companies that buy so-called "lead lists" from third parties will be obliged to carry out checks to ensure that the information has been obtained legally.
The FCA's CEO Andrew Bailey said: "We want CMCs to be trusted providers of high quality, good value services that can truly help consumers. A key element of our approach to regulation will be ensuring that consumers are both protected and treated fairly."
Claims management companies received £5 billion of the £22.5 billion paid out by banks in compensation for PPI misselling between 2011 and 2015, according to the National Audit Office.
