FCA and SRA caution firms on motor finance claim representation and fees
The Financial Conduct Authority (FCA) and Solicitors Regulation Authority (SRA) have issued a joint warning to claims management companies and law firms involved in motor finance claims. They caution against clients having multiple representatives for the same claim and the charging of excessive termination fees.
One claim, too many representatives
The Financial Conduct Authority (FCA) and Solicitors Regulation Authority (SRA) are addressing concerns over clients having multiple representatives for the same motor finance claim.
Instances of up to four different representatives for a single client have been observed, risking excessive termination fees if duplicate agreements are cancelled.
This creates delays and confusion for consumers, alongside operational strain and unnecessary costs for firms.
Representatives are expected to conduct robust onboarding checks to confirm a client is not already instructing another representative.
New agreements should only be entered once a client has terminated previous instructions and made an informed decision.
Clear communication about the implications of signing additional agreements, including termination fees, is essential.
For existing duplicate claims, urgent resolution is required, with client wishes taking precedence.
The SRA's updated Claims Management Activity guidance illustrates how firms should approach multiple sign-ups.
Scrutiny on termination fees
The FCA and SRA are addressing concerns over excessive termination fees, which arise from both multiple representation and routine client terminations.
Representatives must review termination requests to ensure fees are fair, justifiable, and proportionate to the actual work completed, considering the adequacy of the onboarding process.
FCA-regulated firms must ensure fees are reasonable, clearly itemised, and provide fair value under the Consumer Duty.
SRA-regulated firms must ensure fees are fair and proportionate, avoiding charges for undone or unnecessary work or exceeding fee caps.
Both regulators are actively tackling misconduct: the SRA has 89 open investigations relating to 71 law firms, and the FCA has addressed misleading advertising and opened an enforcement investigation against one representative, following a review of contracts that revealed wide fee variation and potentially disproportionate charges.