FCA to launch review of ‘poor’ claims management practices

The FCA is set to launch a review of the claims management market following concern that some claims management companies (CMCs) and law firms are failing consumers.

The regulator said it planned to investigate the root causes of “poor practices” in the claims market, including “aggressive marketing, misleading advertising and unfair exit fees”.

The review will also address concerns that many consumers are entering into agreements without giving appropriate consent, for example via social media adverts or by ticking inadequately explained check boxes.

The FCA said that concerns had surfaced particularly around firms’ approaches to motor finance claims, though its investigation will focus on the full market.

It will collaborate with the Solicitors Regulation Authority (SRA) and other regulatory partners to determine whether consumers are receiving fair value and whether existing price caps are fit for purpose.

It also seeks to determine whether financial incentives at firms are creating conflicts of interest, whether customer journeys are fit for purpose and whether different approaches across different regulatory regimes is causing negative affects in firm behaviour.

Eroding trust

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.”

Aileen Armstrong, executive director for strategy, innovation and external affairs at the SRA, added: “When they work well, claims management services can benefit consumers. But we are concerned about poor practices and behaviours that are not looking after consumers’ best interest.

“We will work closely with the FCA on this important review. This is a cross sectoral problem that requires joined up solutions.”