FLA calls for urgent FCA action on CMCs

The Finance & Leasing Association (FLA) is urging the Financial Conduct Authority (FCA) to take swift action to address poor practices by claims management companies (CMSs), rather than delaying until it has published the outcomes from its market study of the sector, which are due out next year.

The trade body said action on well-evidenced harms to both consumers and the market should not wait until 2027, warning poor claims practices are increasing costs, delaying redress and acting as a drag on UK growth.

The FLA said the FCA review, announced in early May, represents an important opportunity to improve outcomes for consumers and strengthen confidence in the claims management market. It also urged the FCA to work closely with the Solicitors Regulation Authority (SRA), particularly in light of ongoing motor finance commission claims and the potential scale of future redress.

“We welcome the FCA’s decision to undertake this important market study. It reflects the importance of ensuring that the claims management market works effectively for consumers and firms alike.

“The review also presents an opportunity to take action where there is already clear evidence of consumer and market harm, rather than waiting until the study concludes in 2027.

“Consumers should not face unnecessary delays, confusion or costs because of poor practices in the claims management market. Nor should businesses be forced to devote ever-increasing resources to tackling low-quality, duplicative or speculative claims.

“Addressing these issues is not simply about improving consumer outcomes. It is also about ensuring that firms can focus their resources on supporting customers, financing investment and contributing to economic growth. Every resource unnecessarily diverted into poor-quality claims handling is a resource that cannot be used to support customers, finance investment or help businesses grow.

“We look forward to working constructively with the FCA, the Solicitors Regulation Authority (SRA) and other stakeholders throughout the review to help identify practical solutions that improve consumer outcomes, strengthen market efficiency and support the wider economy.”

Co-ordinated response

In its submission to the FCA review, the FLA flagged up the need for the FCA and the SRA to commit to a coordinated regulatory response, as the issues touch both FCA-regulated CMCs and SRA-regulated claimant law firms (CLFs).

The FLA stated: “In particular, we hope the review leads to changes to the Data Subject Access Request (DSAR) regime, which is used to issue meritless bulk requests to lenders in a way that is designed to overwhelm, rather than support consumer rights and an orderly complaints process. The information requests that support CMC and CLF behaviour are overseen by the ICO, which is why it’s so imperative for the FCA to work with the ICO and SRA to address this issue.”