FCA: Concerns extend beyond motor finance
The Financial Conduct Authority (FCA) is stepping up pressure on claims management companies (CMCs) and law firms by launching a review of the claims management market.
The review extends beyond the CMCs it regulates, to lead generators and those authorised by others, working with the likes of the Solicitors Regulation Authority (SRA) – which is already conducting a substantial amount of work on the high-volume claims sector itself.
A failure to engage would be met by “robust action”, the FCA warned.
It pledged that, “where we believe legislative change is needed, we will make recommendations to government, or relevant bodies, including whether CMCs and law firms should be subject to stronger compensation mechanisms if they cause harm”.
The FCA, SRA, Advertising Standards Authority and Information Commissioner’s Office recently set up a taskforce to tackle poor conduct in motor finance claims, and the FCA’s rhetoric has been ratcheting up.
But “while the approach to motor finance claims by some CMCs and law firms has put these issues into sharper focus”, the FCA made clear the review would look at other claims, and it specified housing disrepair.
The review would look at “the root causes of poor practices across the market, like aggressive marketing, misleading advertising and unfair exit fees”.
Other concerns included consumers being signed up without their consent – “without clear, upfront explanations of the implications of signing up or ticking a box, for example on social media adverts” – or by multiple representatives.
In early 2025, the FCA set out areas where CMCs were not meeting our expectations, “but we and other regulators continue to see poor behaviours”.
It said the review would examine:
- Whether consumers receive fair value, including competition on price and quality, and whether existing price caps are still fit for purpose, especially where free-to-use redress mechanisms exist;
- Financial incentives, including fee structures, funding and insurance arrangements, and whether these create conflicts of interest and/or lead to poor conduct and outcomes;
- Whether the full end-to-end consumer journey, including lead generation, marketing and advertising, delivers good consumer outcomes; and
- Whether different approaches across different regulatory regimes affects firm behaviour and if some firms are failing to secure the appropriate permissions.
Alison Walters, director of consumer finance, 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.”
Aileen Armstrong, SRA executive director for strategy, innovation and external affairs, said: “When they work well, claims management services can benefit consumers. But we are concerned about poor practices and behaviours that are not looking after consumers’ best interest.
“We will work closely with the FCA on this important review. This is a cross-sectoral problem that requires joined-up solutions.”
The FCA said it would publish further information on the review in the next fortnight.
Leave a Comment