The Financial Conduct Authority (FCA) has issued a warning
Around 12 million drivers eligible for payouts have received a fresh alert from the City regulator.
The Financial Conduct Authority (FCA) is taking action against claims management firms and legal practices that it believes are deploying potentially deceptive advertisements to encourage motorists to register for compensation assistance. The alert arrives as millions of drivers wait for a decision on the regulator’s proposed redress scheme, which could result in billions being returned to consumers who faced unfair commissions on motor finance deals.
According to proposals announced earlier this year, approximately 12.1 million qualifying car finance contracts could be entitled to compensation, with successful claimants anticipated to receive an average payout of £829.
Nevertheless, the FCA is concerned that certain companies are seeking to profit from the controversy by disguising paid promotions as unbiased financial guidance. The regulator has observed an increasing number of advertisements featuring people who seem to provide neutral advice while failing to properly reveal they are marketing a commercial service.
Certain advertisements also neglect to clarify that drivers can submit a complaint themselves at no cost, without engaging a claims management firm or legal practice. The watchdog has cautioned that some marketing materials inappropriately exploit logos, imagery and branding associated with prominent companies, news outlets, government bodies and well-known personalities to fabricate a misleading impression of backing.
In one instance, the FCA stepped in after a claims management company used doctored and unauthorised footage of personal finance expert Martin Lewis to make misleading assertions about potential compensation payouts. Another business has already committed to withdrawing all of its advertisements following intervention by the watchdog.
Alison Walters, director of consumer finance at the FCA, stated: “Accessing compensation is free, and people don’t need to use a claims management or law firm to get what they’re owed. If they choose to, it should be a genuine and well-informed choice, not one made because of a misleading advert.”
The FCA cautioned that drivers who engage a claims management company or law firm could forfeit more than 30% of any compensation they receive in charges. It also warned consumers against signing contracts with multiple businesses, which could result in them facing several sets of fees.
The regulator revealed it has significant concerns about behaviour within sections of the motor finance claims sector and has established a joint taskforce with regulatory partners to address poor practice.
Amongst the problems identified are unsolicited marketing texts and emails, consumers being enrolled without their awareness or permission and businesses making it challenging for customers to exit agreements.
The watchdog noted some drivers have inadvertently entered contracts after clicking on “free compensation checker” advertisements on social media. Further grievances include companies pursuing fees too aggressively, imposing unreasonable exit charges and neglecting to inform customers that they can escalate complaints to an ombudsman at no cost.
The FCA emphasised that anyone who suspects they were mis-sold car finance can lodge a complaint directly with their lender without involving a third party for a fee.
The compensation scheme itself faces a legal challenge, which is holding up any potential payouts. Nevertheless, the regulator stated it will defend the scheme and considers it the most effective means of addressing what has emerged as one of Britain’s largest consumer finance scandals.
For drivers who have already engaged a claims management company or law firm, the FCA advised they should complain directly to that firm if they believe they were misled, enrolled without permission or hit with excessive fees.
The watchdog is issuing a template complaint letter to assist affected consumers in challenging firms where issues emerge. It noted that people who have been treated unfairly may be eligible to exit agreements without penalty and could potentially be owed additional compensation. Additional information can be accessed here.
