Car dealers: Consultation next month
The Financial Conduct Authority (FCA) has launched a £1m campaign to tell motor finance customers that they do not need to use a claims management company (CMC) or law firm.
It will feature radio and online advertising from next month, and the regulator is teaming up with a number of social media influencers, such as Cameron Smith [1], to get the message to consumers.
This includes how consumers can get out of retainers they already signed.
Research commissioned by the FCA shows that 79% of motor finance customers are aware that they may be owed compensation, but 41% did not know they would not need to use a CMC or law firm if a redress scheme was introduced. Three in five are aware of a possible compensation scheme.
A quarter of motor finance holders aware of the possibility of being owed compensation have already made a claim and a further 39% intend to.
Among those who have made a claim, just under half (46%) did so using a CMC or law firm.
The full results will be in the consultation the FCA is publishing early next month on how the compensation scheme could work.
Sheree Howard, executive director at the FCA, said: “We’ll set out plans for a free, easy-to-access motor finance compensation scheme. We’re concerned a significant number of people are unaware you don’t need to use a CMC or law firm to claim compensation. If you do, you could lose over 30% of any money you’re owed.”
Last month, consumer rights group Consumer Voice highlighted how many millions of consumers [2] have already instructed law firms and said that, while it was right to advise consumers to be cautious now about signing up, “this blunt message doesn’t reflect the fact that it’s far too early to know whether the FCA’s redress scheme will deliver a better outcome than pursuing a claim using professional representation”.
As a result, it is urged those signed up with a law firm to wait until the scheme and for the FCA to “urgently update” its advice accordingly, so that people could ultimately make an informed decision.
The FCA’s response is that it wants to design a redress scheme that makes using a law firm or CMC unnecessary.
In July, the FCA issued a joint statement [3] with the Solicitors Regulation Authority warning CMCs and law firms over poor practices in motor finance commission claims.
The FCA said it has required CMCs to remove or amend 396 motor finance commission promotions since January 2024.
Meanwhile, Barclays has reportedly dropped its appeal, due to be heard in the Court of Appeal this week, against a High Court decision over non-disclosure of a discretionary commission arrangement (DCA) by subsidiary Clydesdale Financial Services, trading as Barclays Partner Finance. It left the motor finance market in 2019.
DCAs allow the broker to adjust the interest rate offered to a customer in return for a higher commission.
Late last year, the High Court upheld the decision of the Financial Ombudsman Service that the commission payment breached the FCA’s commission disclosure rules and the FCA Principles for Business and amounted to an unfair relationship under the Consumer Credit Act 1974.
A Barclays spokesman said: “Following the Supreme Court’s important clarification regarding motor finance lending, we have chosen to withdraw our outstanding legal challenge in order to focus on engaging with the FCA’s consultation and any redress scheme it may subsequently implement.”
There will be a major session, ‘Motor finance claims – where next?’, at our Claims Futures conference [4] on 22 October in Manchester.