The UK’s financial regulator has issued a stern warning to companies representing motor finance commission claims amid fears drivers could lose money.
The Financial Conduct Authority has warned claims management companies (CMCs) and law firms involved in the car finance scandal to protect consumers.
The FCA and the Solicitors Regulation Authority (SRA) said consumers shouldn’t have multiple representatives for the same claim and are not charged “excessive” termination fees.
Any claims management companies and law firms must have robust checks in place, with the FCA writing to lenders about the potential actions they should take to address the issue.
Drivers who believe they have been impacted by the car finance misselling scandal who want to claim compensation are encouraged “not to use a CMC or law firm”.
The regulator said motorists could lose a “significant chunk of any money they are owed” if they use a CMC or law firm to claim compensation.
It added that consumers must have had access to all relevant information on their options before deciding to be represented.
If someone does choose to be represented and has multiple claims, firms are instructed to work together and consult with the customer to agree on a sole representative.
The FCA has issued an urgent warning to claims management companies in relation to the car finance scandal
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PASheree Howard, executive director of authorisations at the FCA, said: “We’ve been clear about our expectations of CMCs.
“Before starting any case, firms should confirm a customer hasn’t already instructed another representative.
“Where someone signed up without fully understanding what they were agreeing to, we wouldn’t expect a termination fee to be charged.”
Ms Howard added that CMCs and law firms must ensure any fees applied to the costs are “reasonable and reflect the work done”.
The FCA is expected to oversee the start of repayments to impacted consumers over the coming months
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PAThe FCA stated that payouts for more than 14 million unfair motor finance agreements could begin this year, with average compensation of around £700.
Around 85 per cent of eligible customers are expected to take part in the compensation scheme, with a total redress of around £8.2billion.
However, this could fall as low as £6.8billion per cent with a 70 per cent uptake, or be as much as £11billion if all impacted drivers take their cases forward.
Following scrutiny from the FCA, two claims management companies have already agreed to change their policies around termination fees, protecting up to 70,000 consumers from being charged more than is reasonable.
The total value of compensation related to the car finance scandal could hit up to £11billion
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PEXELSIt added that law firms regulated by the SRA should act in the best interests of their clients, and any termination fees must be stated before a consumer agrees to move forward.
Sarah Rapson, chief executive of the SRA, noted that protecting consumers was the primary focus, especially with millions of claims being submitted.
The SRA has confirmed that it will continue to work with its regulated law firms and take action if it is deemed necessary.
“Firms operating here should be under no illusion as to the requirements. We have reminded them of their responsibilities on a number of occasions, including in a recent Warning Notice and in our updated claims management guidance,” she said.
