At long last, the FCA is launching a review of the claims management market, following concerns that consumers are being failed by some claims management companies (CMCs) and law firms.
The review will look at the root causes of poor practices across the market, like aggressive marketing, misleading advertising and unfair exit fees. Other concerns include consumers being signed up without their consent - without clear, upfront explanations of the implications of signing up or ticking a box, for example on social media adverts - or by multiple representatives, potentially causing confusion and delaying compensation.
Working in close collaboration with the Solicitors Regulation Authority (SRA) and other regulatory partners, the FCA will use the review and supervisory and enforcement powers to rigorously examine:
Whether consumers receive fair value, including competition on price and quality, and whether existing price caps are still fit for purpose, especially where free-to-use redress mechanisms exist.
Financial incentives, including fee structures, funding and insurance arrangements, and whether these create conflicts of interest and/or lead to poor conduct and outcomes.
Whether the full end-to-end consumer journey, including lead generation, marketing and advertising, delivers good consumer outcomes.
Whether different approaches across different regulatory regimes affects firm behaviour and if some firms are failing to secure the appropriate permissions.
The FCA will look at practices of firms it regulates, including lead generators, as well as those authorised by others – working with other regulatory partners.
The FCA will publish further information on the review by mid-May. ITC will continue to pass onto the regulators poor practices it sees from CMCs and law firms as it has been doing since 2021!
This has come too late for the FCA’s motor finance compensation scheme which has received four separate legal challenges, three from lenders (Volkswagen Financial Services, Mercedes Benz Financial Services, Crédit Agricole Auto Finance) and one from the consumer side (Consumer Voice and the law firm Courmacs.). According to some in the press, the scheme is “now hanging by a thread.”
This will cause delay to customers receiving payments as the case is unlikely to be heard before October. The FCA has also asked lenders to consider contingency planning for there being no scheme. If this was to be the case then complaints would need to revert to being dealt with individually by firms, the FOS and the Courts. The FCA says this will cost more and customers will have to wait longer to receive any redress payments.
In the meantime, network firms should continue to deal with complaints received from customers about this by passing them onto the lender or ITC as appropriate.