Regulators warn CMCs over representation and fees

The Financial Conduct Authority (FCA) and Solicitors Regulation Authority (SRA) have ramped up the pressure on claims management companies (CMCs) and law firms involved in motor finance commission, ahead of the expected announcement of an industry-wide redress scheme.

The move is designed to ensure consumers do not have multiple representatives for the same claim and are not charged excessive termination fees.

In addition, the FCA will be launching an advertising campaign on 5 February to warn consumers about scammers pretending to be car finance lenders and falsely claiming that people are owed compensation, despite there being no motor finance compensation scheme in place yet.

Warning

The regulators have issued a joint warning reminding CMCs and law firms that they are expected to have robust checks in place to confirm consumers have not already instructed another representative. The FCA has also written to lenders setting out the potential actions they should take to address this issue.

If a consumer wishes to switch representatives or terminate an agreement, firms must do so without charging unfair fees. Any fees charged must be reasonable and reflect the work done.

The FCA says that following investigation, two FCA-regulated CMCs have agreed to change their termination fee policies,  protecting 70,000 consumers from excessive charges.

Fees

In their warning, the regulators point out that fees charged by FCA-regulated CMCs must provide fair value in line with the Consumer Duty, while SRA-regulated law firms should act in their clients’ best interests. They can only bill in line with the agreement the client signed up to before work started and any ‘termination’ fee must have been clearly stated up-front. Duplicate claims should be resolved through efficient and cost-effective co-operation.

“Before starting any case, firms should confirm a customer hasn’t already instructed another representative. Where someone signed up without fully understanding what they were agreeing to, we wouldn’t expect a termination fee to be charged. If any fee is applied, it must be reasonable, and reflect the work done.”

“We have reminded them of their responsibilities on a number of occasions, including in a recent Warning Notice and in our updated claims management guidance. We will continue to engage with firms in this area and take action where required.”

The FCA and SRA say they will continue to monitor the conduct of CMCs and law firms, and act where poor practices are identified. Poor onboarding and due diligence practices, lack of information to consumers and misleading advertising have been identified as factors contributing to multiple representation.

The FCA’s increased proactive monitoring has resulted in the removal or amendment of more than 800 misleading adverts by FCA regulated CMCs since January 2024.

In October last year, the FCA confirmed it would be looking into exit fees. Five FCA regulated CMCs have agreed to make changes to their processes following scrutiny, including not taking on new clients until they are able to show they comply with FCA rules.

Separately, using powers under the Consumer Rights Act 2015 and, for the first time, under the Digital Markets, Competition and Consumers Act 2024, the FCA, working closely with the SRA, has required nine law firms to provide information about their exit fees.

As at 31 January 2026, the SRA had 89 open investigations relating to 71 law firms that manage high-volume consumer claims. It has also closed seven firms working in this area.