Regulators crack down on ‘bad practice’ in motor finance claims ahead of ruling
The legal watchdog and the FCA teamed up to issue warnings to law firms and claims management companies over ‘poor practices’ in motor finance claims ahead of Friday’s Supreme Court ruling.
The Solicitors Regulation Authority (SRA) and Financial Conduct Authority (FCA) are expecting law firms and CMCs to inform clients of a potential redress scheme over commission fees.
Following the Supreme Court ruling, the FCA has confirmed that it will make a decision within six weeks of the judgment on whether to introduce a redress scheme.
However, the SRA’s Chief Executive, Paul Philip, has stated that the regulators are “very concerned about some of the practices we are seeing in the motor finance commission claim market.”
The regulatory bodies stated that some law firms and CMCs have failed to inform consumers about the availability of free-to-claim alternatives, as well as some firms providing inaccurate or misleading information on the likelihood of success or the potential value of a claim.
FCA’s Executive Director Sheree Howard stated: “We’ve seen law firms and CMCs advertising highly speculative figures, so we are warning them of our expectations when it comes to drumming up clients for motor finance commission claims.”
Countdown to court ruling
Over the last year, the FCA said it has required 224 motor finance commission promotions to be amended or withdrawn. As of 30 June, the SRA has 89 live investigations into 73 law firms, linked to potential breaches of its rules relating to high-volume claims work.
The SRA, which regulates law firms, and the FCA, which regulates the CMCs, explain that consumers must be made aware of their rights to terminate and any fees that may be payable by them if they do not proceed.
While any charges that are applied by law firms or CMCs must be fair and reasonable.
Howard added that “consumers do not need to use a CMC or a law firm” if the FCA goes ahead and introduces a redress scheme for motor finance.
“Consumers should be aware that by signing up now with a CMC or law firm, they may end up paying for a service they do not need and losing up to 30 per cent of any money they may receive,” he warned.
Both Howard and Philip stated that the bodies are working closely together on this issue and where there is a case they will “investigate and take action” against the firms.
On Friday afternoon, the Supreme Court will deliver its decision on whether to consider or dismiss the appeals of two lenders whose cases were previously deemed by the Court of Appeal to involve unlawfully obtained commissions on motor finance, without the customer’s informed consent.