Alison Walters, Director, 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 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.”
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 9 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 the FCA they comply with FCA rules. We’re expecting to write to FCA regulated CMCs involved in motor finance claims this week to reiterate our expectations.
The FCA’s increased proactive monitoring has led to the removal or amendment of more than 740 misleading adverts by FCA regulated CMCs since January 2024. This number increased significantly following the Johnson judgment. Concerns include unrealistic claims about success rates and the value of potential compensation.
The FCA has 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 campaign will run online and on radio.
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.
Consumer guidance
Consumers who believe they have been misled by advertising, signed up without their consent, charged unreasonable fees, had their data mishandled, or otherwise feel they have been treated unfairly by a CMC or law firm should first complain to the firm. If dissatisfied with the response, they should take their complaint to the Claims Management Ombudsman or Legal Ombudsman.
To support the public, the SRA has also published guidance on motor finance claims, and on no-win, no-fee agreements.
Individuals concerned about direct marketing practices or those wishing to make a complaint, are encouraged to do so via the ICO website. They can also report spam text messages to the ICO by forwarding the message for free to 7726 (which spells out SPAM).
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