SRA and City watchdog fire joint warning on motor finance claims

Professional and City regulators have teamed up to warn claimant firms to refrain from ‘misleading’ marketing and poor practices in handling motor finance commission claims.

The warning comes a day before the Supreme Court’s judgment in three linked cases. If it goes against the lenders, the FCA will likely consult on a free redress scheme. The regulators said they expect law firms and CMCs to inform clients of the existence of such a scheme ‘or where there is a realistic prospect of one being introduced’. This must be done before a client signs any agreement.

Submitting a claim through a law firm or CMC can mean consumers sacrifice up to 30% of any award in fees, the regulators say. 

The regulators have become ‘increasingly concerned about the conduct of some law firms and CMCs in this area’. These concerns include the volume and accuracy of marketing materials, and how information is shared or verified when clients are passed on from third parties. They also identify failure to advise consumers about free-to-claim alternatives, and firms and CMCs providing inaccurate or misleading information on the likelihood of success or potential value of a claim.

Paul Philip, SRA chief executive, said: ‘We are very concerned about some of the practices we are seeing in the motor finance commission claim market. Law firms have a regulatory duty to act in the best interests of their clients but if they mislead clients, fail to get their explicit consent, do not explain cost information clearly or are not sharing the required information on free alternative routes before signing them up, they are clearly failing to meet their obligations.

‘Where we find cases where firms are not acting in the best interest of their clients, we will investigate and take action.’

The SRA currently has 89 live investigations into 73 firms linked to potential breaches of SRA rules relating to high-volume claims.

Sheree Howard, executive director at the FCA, added: ‘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. We will take action if we see evidence of poor practice.

‘Consumers do not need to use a CMC or a law firm. If we introduce a redress scheme for motor finance, we will aim to make it easy for people to take part. 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% of any money they may receive.’

The FCA has required 224 motor finance commission promotions to be amended or withdrawn over the last year as a result of poor conduct.