Regulators warn firms on motor finance claims and excessive fees
The Financial Conduct Authority (FCA) and Solicitors Regulation Authority (SRA) have issued a joint warning to claims management companies and law firms. The warning addresses multiple representation and excessive termination fees in motor finance commission claims.
Fair fees and robust checks for claims
The joint warning from the FCA and SRA emphasizes that claims management companies (CMCs) and law firms must implement robust checks to prevent consumers from having multiple representatives for the same motor finance claim.
Firms are also reminded that any termination fees charged to consumers wishing to switch representatives or cancel an agreement must be reasonable and clearly reflect the work already completed.
These fees must be stated upfront, and firms are expected to act in their clients' best interests, particularly when consumers may have signed up to multiple firms without full understanding.
Following scrutiny from the FCA, two FCA-regulated CMCs have already agreed to amend their termination fee policies, protecting approximately 70,000 consumers from potentially excessive charges.
The SRA similarly expects its regulated law firms to adhere to clear standards and regulations, ensuring that billing aligns with client agreements and that duplicate claims are resolved through efficient cooperation.
Both regulators have also written to lenders outlining potential actions to address these issues.
Proactive monitoring and consumer warnings
The FCA and SRA are committed to ongoing monitoring of CMCs and law firms, with a focus on identifying and addressing poor practices such as inadequate onboarding, due diligence, and misleading advertising that contribute to multiple representation.
Since January 2024, the FCA's proactive monitoring has resulted in the removal or amendment of over 800 misleading advertisements by regulated CMCs.
An investigation into a specific CMC's advertising and sales tactics for motor finance claims has also been opened.
To further protect consumers, the FCA will launch an advertising campaign on February 5, 2026, warning against scammers who falsely claim compensation for motor finance, ahead of any official redress scheme.
A complex market, a necessary intervention
This joint warning highlights the persistent challenges in the motor finance claims market, where consumer vulnerability to predatory practices remains high.
While the regulatory intervention is crucial for safeguarding consumers from unfair fees and confusing multiple representations, the complexity of existing claims and the potential for new scams suggest an ongoing need for vigilance.
Effective enforcement will be key to ensuring firms genuinely prioritize client interests over profit in this intricate landscape.