The Financial Conduct Authority (FCA) secured the removal or amendment of 170 misleading car finance claims adverts in June as regulators intensified scrutiny of claims firms.
The action forms part of a joint taskforce involving the FCA, Advertising Standards Authority (ASA), Solicitors Regulation Authority and Information Commissioner’s Office.
It takes the number of adverts removed or changed following FCA intervention to more than 1,200 since January 2024. The ASA has also launched six investigations into motor finance claims advertising by law firms.
The regulator reviewed 255 promotions from 83 authorised firms during June and contacted 36 businesses over potential breaches of financial promotion rules or failures to meet Consumer Duty expectations.
Some adverts were presented as social media posts from consumers recommending websites where motorists could check their finance agreements. However, they did not make clear that they were financial promotions directing people to services operated by claims management companies (CMCs).
Other promotions used references to the FCA’s proposed motor finance redress scheme in ways that could imply an affiliation with the regulator.
The FCA also identified adverts that failed to highlight free routes for making claims or promoted claims management services without the necessary authorisation.
Motor finance redress plans drive claims activity
The intervention comes during a period of continued uncertainty over the FCA’s proposed industry-wide motor finance redress scheme.
The regulator has proposed that the scheme should cover eligible motor finance agreements dating back to 2007, potentially involving up to 14 million car buyers.
Its initial proposals indicated that eligible consumers could receive approximately £700 per agreement on average, with lenders facing a total compensation bill estimated at £8.2 billion.
The proposals followed the Supreme Court’s ruling on motor finance commission arrangements and subsequent court findings that established potential liabilities for lenders in some cases.
However, the design of the scheme has faced opposition from lenders and the automotive industry.
The FCA received more than 1,000 responses to its consultation, including concerns about its compensation calculations, disclosure requirements, historic records and the proportionality of the proposed approach.
The National Franchised Dealers Association and Finance & Leasing Association have both called for changes, while the prospect of further legal action has added uncertainty over the scheme’s timetable.
The FCA has repeatedly stressed that motorists will not need to use a CMC or law firm to obtain compensation through any regulatory redress scheme. Complaints can be made directly to lenders without charge, with the Financial Ombudsman Service providing a free route for eligible disputes.
It previously launched a £1 million consumer awareness campaign after research found that many motorists did not realise they could pursue compensation without paying a claims company.
FCA restricts marketing by claims firms
The FCA agreed voluntary requirements with two firms, requiring them to stop or alter their marketing activities.
This takes the number of voluntary requirements imposed in connection with motor finance claims activity to 12 during the past year.
Eight alerts were also issued in June against unauthorised businesses promoting regulated claims management services without FCA approval.
Alison Walters, director of consumer finance at the FCA, said: “Consumers should be able to trust the information they see about car finance claims. Too often, we are still seeing promotions that obscure key facts, create unnecessary pressure on consumers to sign up, or risk misleading people about their options.”
The latest action follows the FCA’s enforcement investigation into The Claims Protection Agency Limited over its advertising and sales practices connected with motor finance compensation.
The FCA has also confirmed an enforcement investigation into Consultation Claims Limited. Publication of an investigation does not mean the regulator has concluded that a firm breached its requirements.
ASA investigates claims adverts from law firms
The FCA, ASA, Solicitors Regulation Authority and Information Commissioner’s Office’s joint taskforce will tackle the promotion and handling of motor finance claims.
The ASA has launched six formal investigations into motor finance claims advertising by law firms.
Its investigations will examine whether adverts provide sufficient clarity about fees and free alternatives, exaggerate possible compensation or mislead consumers through “free checker” tools.
Miles Lockwood, director of complaints and investigations at the ASA, said: “The work of the taskforce is important, consumers should be treated fairly and be confident that the claims they see in ads for car finance schemes are transparent and truthful.
“Our investigations will root out problem claims, set clear lines in the sand for advertisers and trigger follow-up enforcement action where necessary.”
The ASA is using its AI-based Active Ad Monitoring system to identify potentially misleading motor finance claims adverts and establish precedents for further compliance action.
Regulators said action could extend beyond misleading advertising where the taskforce identifies wider misconduct by CMCs, lead generators or law firms.
Motorists warned about claims management fees
The FCA warned that consumers using a CMC or law firm could pay fees exceeding 30% of any compensation received.
Motorists can instead complain directly to their lender without charge. Those concerned about how they were signed up by a claims firm, how their data was used or the fees charged should first complain directly to that business.
Consumers were also advised against registering the same complaint with multiple claims businesses because they could become liable for more than one fee.
The FCA said its wider intervention had enabled more than 28,000 consumers to leave claims contracts without charge. Three CMCs have also reduced fees affecting more than 500,000 consumers.
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