The FCA, Solicitors Regulation Authority (SRA), Information Commissioner’s Office (ICO) and the Advertising Standards Authority (ASA) are joining together to tackle misleading advertising and inadequate information provided by some claims management companies (CMCs) and law firms working on motor finance claims, and the risk that excessive fees are charged to clients.
Using powers under the Consumer Rights Act 2015 and, for the first time, under the Digital Markets, Competition and Consumers Act 2024, the FCA, working closely with the SRA, has required nine law firms to provide information about their exit fees. Two FCA-regulated CMCs have agreed to change their exit fee policies.
Two others have agreed not to take on clients or to advertise until they’re able to show they comply with FCA rules.
The FCA plans to write to regulated CMCs involved in motor finance claims this week to reiterate its expectations.
The FCA’s increased monitoring has led to the removal or amendment of more than 740 misleading adverts by FCA regulated CMCs since January 2024. Concerns include unrealistic claims about success rates and the value of potential compensation.
The FCA has recently launched a £1 million ad campaign to make people aware they don’t need to use a CMC or law firm to seek motor finance compensation, and that they stand to lose a chunk of any compensation they’re owed if they choose to. Research shows 4 in 10 people don’t know they can receive motor finance compensation without using a CMC or law firm.
The SRA is investigating 76 law firms involved in high-volume claims and has closed five firms to protect the public. Its recent Thematic Review set out the key issues, and it has made clear its expectations on termination fees. The FCA and SRA continue to work closely, given that many FCA regulated CMCs refer motor finance claims to law firms.
Since January 2025, the ICO has received over 230,000 complaints via the spam reporting service regarding unsolicited and unlawful direct marketing practices linked to motor finance claims. In response, the ICO has multiple investigations ongoing and is actively considering further regulatory action against several organisations.
The ASA is also reviewing advertising practices in this sector.
Alison Walters, director of consumer finance at the FCA, said: “Misleading advertising and inadequate disclosure have meant that people are signing contracts with some firms without the facts. When they try to exit, they face high fees. We’re acting where we see bad practice and, through our own advertising, we’re ensuring consumers can make informed choices.”
Paul Philip, chief executive of the SRA, added: "The risks and issues facing consumers in this area of the market are unprecedented, and we are using all the levers at our disposal to protect consumers, identify poor practices and hold law firms to account.”
