UK regulators have intensified their crackdown on claims management companies (CMCs) and consumer law firms accused of misleading the public over car finance compensation claims. Several firms have been shut down, while others have been ordered to stop taking on new clients as authorities move to stamp out bad practices in the growing sector.
Four key regulators have joined forces to address widespread misconduct among CMCs and legal firms eager to profit from the multibillion-pound compensation expected to be paid to drivers affected by the car finance commission scandal.
The Financial Conduct Authority (FCA) is set to unveil further details on Tuesday about an official compensation scheme for affected consumers. The scheme is expected to pave the way for payouts to begin next year.
The move follows an August supreme court ruling that largely overturned an earlier judgment which could have triggered payouts of up to £44bn. Despite this, the ruling is still expected to lead to redress covering some car loans dating back to 2007, with compensation potentially reaching £18bn.
For months, CMCs and law firms have been aggressively marketing their services to consumers who may be eligible for compensation. However, regulators have raised concerns that many of these firms are making exaggerated or misleading claims about potential payouts, failing to inform consumers about free alternatives, and charging excessive fees — sometimes as high as 30% of any award.
In response, the FCA has teamed up with the Solicitors Regulation Authority (SRA), the Information Commissioner’s Office (ICO), and the Advertising Standards Authority (ASA) to tackle misleading advertising, poor disclosure, and unfair charging practices.
The SRA confirmed it is currently investigating 76 law firms and has already shut down five to protect consumers.
Meanwhile, two FCA-regulated CMCs have agreed to revise their policies after being found to impose unfair exit fees on clients who attempted to withdraw from their services.
Two other firms “have agreed not to take on clients or to advertise until they are able to show the FCA they comply with FCA rules”, said the regulators.
The FCA said its increased monitoring had led to more than 740 misleading adverts by CMCs that it polices being changed or pulled since January 2024. “Concerns include unrealistic claims about success rates and the value of potential compensation,” the regulators said.
