Fca Car Finance Compensation Review Targets Misleading Ads and Fees
The fca car finance compensation review has begun as the regulator moves against claims management companies it says are misleading victims of financial scandals about compensation. The FCA says some firms used aggressive marketing, misleading advertising and unfair exit fees, while consumers were also signed up without permission or by multiple companies.
Alison Walters on market conduct
Alison Walters, director of consumer finance at the FCA, said: “CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy. This review will give us a clear picture of how the market is working and galvanise the further actions that are needed.” For consumers, that means the regulator is no longer treating complaints about sign-up tactics as isolated cases.
800 misleading adverts have already been removed or amended, and more than 28,000 consumers have been able to exit contracts free of charge. The FCA said three claims management companies agreed to reduce their fees after its intervention, showing the review sits on top of an enforcement campaign already underway.
33% fees on car finance claims
33% is the level of fees some claims management companies can charge on car finance payouts, according to the background the FCA is acting on. That is why the regulator and lenders have told consumers not to use these firms for the motor finance scheme, which is free to use and covers millions of people expected to receive payouts this year.
£1,846 was the average compensation figure one advert claimed for motor finance payouts, and the FCA said it was concerned the number was presented without explanation. The regulator banned that advert last month after it used edited and unauthorised clips of Martin Lewis, a sign that ad review is now moving from complaint handling into direct market cleanup.
2011 to 2024 claims market
2011 was the year a judicial review set mass payouts over the payment protection insurance scandal in motion, and the claims industry then expanded quickly. Between 2011 and 2015, claims management companies made £3.8bn to £5bn from PPI claims, according to National Audit Office estimates, before the FCA set a 20% cap on commissions for PPI claims in 2018 and took over regulation of the sector in spring 2019.
30% was the cap the FCA had imposed on commissions for non-PPI claims by 2022, yet it still said firms were creating problems across other compensation work, including housing disrepair claims. In March, the regulators, the Advertising Standards Authority and the Information Commissioner’s Office formed a joint taskforce to deal with misleading adverts and sign-up processes, and the Solicitors Regulation Authority said it was “concerned about poor practices and behaviours that are not looking after consumers’ best interest.”
The unresolved issue is whether the review changes conduct fast enough to stop duplicate claims and unauthorized sign-ups from slowing payouts for people already due money under the motor finance scheme. If the FCA follows through on its warning, the next pressure point is fees, because compensation that is free at the point of claim should not be reduced by firms that sign consumers up without permission.
