The Financial Conduct Authority (FCA) has announced a review of the claims management market, citing concerns that consumers are being let down too often. The review will investigate the root causes of poor practices, including aggressive marketing, misleading adverts, and unfair exit fees.
Key Concerns
The regulator highlighted issues such as consumers being signed up without consent or represented by multiple firms, leading to confusion and delayed compensation. The FCA noted that motor finance claims handling by some claims management companies (CMCs) and law firms has brought these problems into sharper focus, alongside concerns about housing disrepair claims.
Scope of the Review
The FCA will work closely with the Solicitors Regulation Authority (SRA) and other partners to examine whether consumers receive fair value, including competition on price and quality. It will assess if existing price caps remain fit for purpose, especially where free redress options exist. Financial incentives, fee structures, funding, and insurance arrangements will also be scrutinized.
The review will explore whether fee structures create conflicts of interest or lead to poor outcomes. It will also evaluate lead generation, marketing, and advertising practices to ensure they deliver good consumer outcomes. The FCA expects full cooperation from firms and will take robust action if needed.
Potential Legislative Changes
If legislative changes are required, the FCA will make recommendations to the government. This could include stronger compensation mechanisms for CMCs and law firms that cause harm.
Statements from Regulators
Alison Walters, FCA director of consumer finance, said: “CMCs and law firms can help consumers secure compensation, but too often consumers are being let down, eroding trust and damaging the economy. This review will give us a clear picture of how the market is working and galvanise further actions.”
Aileen Armstrong, SRA executive director, added: “When they work well, claims management services can benefit consumers. But we are concerned about poor practices that do not look after consumers’ best interests. This is a cross-sectoral problem requiring joined-up solutions.”
The FCA will publish further details by mid-May, following a joint taskforce announced in March to address poor handling of motor finance claims.
