The Financial Conduct Authority (FCA) has launched a review of claims management companies (CMCs) amid concerns that firms are misleading victims of financial scandals, such as car finance, about their compensation. The regulator highlighted issues including aggressive marketing, misleading advertising, unfair exit fees, and consumers being signed up without their permission or by multiple companies, which could delay compensation.
CMCs have targeted victims of the car finance scandal, where they can charge fees up to 33% of final payouts. The FCA and lenders advise consumers not to use these firms, as the regulator's scheme is free. Millions are expected to receive payouts this year over the motor finance scandal, where drivers were overcharged for loans between 2007 and 2024.
Alison Walters, director of consumer finance at the FCA, said: “CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy. This review will give us a clear picture of how the market is working and galvanise the further actions that are needed.”
In March, regulators including the FCA, Solicitors Regulation Authority (SRA), Advertising Standards Authority, and Information Commissioner's Office set up a joint taskforce to tackle misleading adverts and sign-up processes. The FCA has removed or amended 800 misleading adverts, and over 28,000 consumers have exited contracts free of charge. Three CMCs agreed to reduce their fees.
The SRA, which regulates about 9,000 law firms in England and Wales, has opened over 100 investigations relating to 76 firms managing consumer claims. Last month, the FCA banned an advert using unauthorised clips of consumer rights expert Martin Lewis, which claimed an average compensation of £1,846 without explanation.
