The Financial Conduct Authority (FCA), Solicitors Regulation Authority (SRA), Information Commissioner’s Office (ICO), and the Advertising Standards Authority (ASA) have announced a coordinated effort to address misleading advertising and insufficient information provided by some claims management companies (CMCs) and law firms handling motor finance claims.
The regulators are also examining the risk of excessive fees being charged to clients.
The FCA, using powers under the Consumer Rights Act 2015 and, for the first time, under the Digital Markets, Competition and Consumers Act 2024, has required nine law firms to provide information about their exit fees.
Two FCA-regulated CMCs have agreed to change their exit fee policies, while two others have agreed not to take on clients or advertise until they can demonstrate compliance with FCA rules. The FCA plans to write to regulated CMCs involved in motor finance claims to reiterate its expectations.
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, said the risks and issues in this market are unprecedented. He noted, “We are using all the levers at our disposal to protect consumers, identify poor practices and hold law firms to account.”
Since January 2024, the FCA’s proactive monitoring has resulted in the removal or amendment of more than 740 misleading adverts by FCA-regulated CMCs. This figure increased following the Johnson judgment. The FCA identified concerns such as unrealistic claims about success rates and the value of potential compensation.
The FCA’s recent actions follow a major ruling that more than 270,000 UK motorists are due £200 million in compensation after it was found that some insurers had underpaid claims for stolen or written-off vehicles. Nearly 150,000 policyholders have already received £129 million, with the remainder expected to follow.
Industry experts have welcomed the FCA’s intervention, noting the operational implications for insurers and the importance of maintaining rigorous claims procedures and robust governance. The redress package and process adjustments are being viewed as a benchmark for best practice, with insurers now under increased pressure to balance market volatility with fairness and ensure customers are not penalised for factors beyond their control.
The FCA’s consumer protection agenda extends beyond motor finance claims. The regulator has also issued warnings on undervaluing insured items, imposed a Voluntary Requirement on Direct Line Group, and seen Admiral set aside £50 million for customers underpaid on vehicle claims.
The FCA has reviewed GAP insurance sales, pricing at renewal, and claims handling across home, travel, and protection lines, reflecting a broader commitment to consumer rights and fair outcomes.
The FCA has also launched a £1 million advertising campaign to inform consumers that they do not need to use a CMC or law firm to seek motor finance compensation. The campaign also highlights that using such services may reduce the amount of compensation received.
Research indicates that 40% of people are unaware they can claim compensation without a CMC or law firm. The campaign will be broadcast online and on radio.
The SRA is also currently investigating 76 law firms involved in high-volume claims and has closed five firms to protect the public. Its recent Thematic Review outlined key issues and clarified expectations regarding termination fees. The FCA and SRA are maintaining close collaboration, as many FCA-regulated CMCs refer motor finance claims to law firms.
Since January 2025, the ICO has received over 230,000 complaints through its spam reporting service about unsolicited and unlawful direct marketing practices related to motor finance claims. The ICO has several ongoing investigations and is considering further regulatory action against multiple organisations.
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