Regulators move to curb misleading motor finance claims by CMCs and law firms

The Financial Conduct Authority (FCA) has joined with the Solicitors Regulation Authority (SRA), the Information Commissioner’s Office (ICO) and the Advertising Standards Authority (ASA) to address concerns about misleading advertising and inadequate disclosure by some claims management companies (CMCs) and law firms involved in motor finance claims, according to a press release from the FCA.

The joint initiative also focuses on the potential for clients to be charged excessive fees.

Alison Walters, Director of Consumer Finance at the FCA, said misleading advertising and poor disclosure had led some consumers to sign contracts “without the facts,” adding that when clients try to exit such agreements, “they face high fees.” Walters said the FCA was “acting where we see bad practice” and was also running its own advertising to help consumers make informed choices.

Paul Philip, Chief Executive of the SRA, said the regulators were using “all the levers at our disposal to protect consumers, identify poor practices and hold law firms to account.”

Under powers granted by the Consumer Rights Act 2015 and the new Digital Markets, Competition and Consumers Act 2024, the FCA and SRA have required nine law firms to provide information about their exit fees. Two FCA-regulated CMCs have amended 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 said it has removed or amended more than 740 misleading advertisements by regulated CMCs since January 2024, following increased monitoring. Many of the cases arose after the Johnson judgment, with concerns including inflated claims about success rates and compensation values.

In a related effort, the FCA has launched a £1 million advertising campaign to inform consumers that they do not need to use a CMC or law firm to pursue motor finance compensation. The regulator said four in ten people were unaware of this option.

The SRA confirmed it is investigating 76 law firms involved in high-volume claims and has closed five to protect consumers. Its recent thematic review outlined key issues and expectations regarding termination fees.

The ICO said it had received more than 230,000 complaints since January 2025 about unsolicited and unlawful marketing linked to motor finance claims. The watchdog confirmed multiple investigations are ongoing and further enforcement action is being considered.

The ASA said it is also reviewing advertising practices in the sector.

"Regulators move to curb misleading motor finance claims by CMCs and law firms" was originally created and published by Motor Finance Online, a GlobalData owned brand.