The FCA has launched a review of the claims management market, following concerns that consumers are being failed by some claims management companies and law firms.
The review will focus on aggressive marketing, misleading advertising and unfair exit fees.
Other concerns cited by the regulator 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.
The FCA said that whilst the approach to motor finance claims by some claims management companies has pulled these issues into focus, it is also concerned about the handling of other claims.
Last year the regulator set out areas for concern where firms were not meeting its expectations, it has launched the review as it continues to see poor behaviours.
Since then, 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 3 CMCs reduced their unreasonable fees protecting over 500,000 consumers.
Formal investigations are also under way, with 1 announced by the FCA.
The review will work in collaboration with the Solicitors Regulation Authority to examine:
It will look at practices of the firms it regulates, including lead generators, as well as those authorised by others such as law firms regulated by the SRA.
The FCA warmed that CMCs could find they are subject to stronger compensation mechanisms if the review finds they cause harm.
Alison Walters, director of consumer finance at the FCA, said: “CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy.
“This review will give us a clear picture of how the market is working and galvanise the further actions that are needed.”
The FCA will publish further information on the review by mid-May.