Taskforce to target poor handling of motor finance claims

Three regulators, including the Financial Conduct Authority (FCA), have announced plans to set up a new taskforce to tackle poor handling of motor finance claims by some claims management companies (CMCs) and law firms, just hours ahead of the FCA’s long-awaited announcement of an industry-wide redress scheme which is expected to impact up to 14 million agreements resulting in millions of consumer claims.

The FCA, Solicitors Regulation Authority (SRA), Information Commissioner’s Office (ICO) and Advertising Standards Authority (ASA) announced they have agreed to join up their efforts.

The regulators said they will step up their intelligence sharing and continue to take co-ordinated and targeted actions using the full extent of their powers to mitigate harm to consumers. The planned taskforce  will take swift action to tackle issues with unsolicited and misleading advertising, meritless claims, multiple representation, and unfair exit fees.

Previous research commissioned by the FCA found that 79% of motor finance customers were aware that they may be owed compensation and 61% of a possible compensation scheme. However, 41% of those aware they may be owed compensation did not know they would not need to use a CMC or law firm if a redress scheme is introduced, raising concerns they could end up paying unnecessary fees.

“Should they decide to do so, it’s important that they can trust CMCs and law firms to act in their best interests. This taskforce will ensure we deal with problems quickly and decisively.”

Deb Jones, executive director of transformation and the SRA’s taskforce lead, said: “We want consumers to have confidence in the system. The taskforce is a great example of how we as regulators can use our collective expertise and powers to not only take action, but also to improve consumers’ awareness of the standards they can expect from law firms and CMCs.”

Miles Lockwood, director of complaints and investigations at the ASA, said: “It’s vital that ads promoting motor finance redress services are clear about the commitments and costs of engaging with a CMC or law firm. The ASA will take robust and proactive action to tackle misleading advertising of such services, working in partnership with other regulators as part of this taskforce.”

Both the FCA and SRA have run social media and advertising campaigns designed to inform consumers that there is no need to use a third party to make a motor finance claim. The FCA has emphasised any motor finance redress scheme will be free to use, warning that consumers do not need to use a CMC or a law firm, and those who do may lose up to 30% of any compensation.

In recent months the FCA has removed or amended 800 misleading adverts, in excess of 28,000 consumers have been able to exit contracts free of charge, and three CMCs have been required to reduce unreasonable fees. Formal investigations are also under way, including one announced by the FCA. The SRA has 89 open investigations relating to 71 firms that manage high-volume consumer claims, and has also closed seven firms working in this area.