SRA and FCA warn law firms are misleading clients over costly motor finance claim arrangements.
Two of the UK’s most powerful regulators have fired a stark warning at law firms and claims management companies (CMCs) over widespread misconduct in handling motor finance commission claims.
The Solicitors Regulation Authority (SRA) and Financial Conduct Authority (FCA) issued the joint alert just one day before the Supreme Court delivers a ruling that could trigger a massive wave of compensation claims against lenders.
In anticipation of the judgment, the regulators say they have grown “increasingly concerned” by the volume of misleading adverts, vague cost disclosures, and unscrupulous sign-up tactics being used by some firms and CMCs.
Embed from Getty ImagesCrucially, the watchdogs fear that consumers may be signing binding agreements without being told they could claim for free—potentially handing over up to 30% of any compensation for services they never actually needed.
Paul Philip, chief executive of the SRA, did not hold back.
“We are very concerned about some of the practices we are seeing in the motor finance commission claim market,” he said. “Law firms have a regulatory duty to act in the best interests of their clients. But if they mislead clients, fail to obtain explicit consent, or don’t explain cost implications or the existence of free alternatives, they are falling drastically short of their professional obligations.”
The warning couldn’t come at a more critical time.
The Supreme Court is set to rule on three linked cases concerning motor finance commissions. Should the judgment go against the lenders, the FCA says it will likely move to introduce a no-cost redress scheme for affected consumers—potentially offering compensation without legal help.
In such a scenario, any consumers who signed up with a CMC or law firm beforehand may find themselves needlessly paying thousands in fees.
The SRA currently has 89 live investigations into 73 different law firms suspected of breaching regulatory rules while handling these high-volume claims.
Sheree Howard, executive director at the FCA, echoed the urgency of the situation.
“We’ve seen law firms and CMCs advertising highly speculative figures,” she said. “Consumers must understand they don’t need to use these services. If a redress scheme is created, we aim to make it easy and accessible. Signing up now with a law firm or CMC could mean handing over 30% of your compensation for no reason.”
Howard emphasised that firms aggressively recruiting clients must ensure they do so transparently. That includes making clear if a free alternative exists or is realistically expected to be introduced.
The regulators are also scrutinising how third-party leads are passed along, often without verifying the accuracy of client information or ensuring individuals fully understand what they’re signing.
According to the FCA, it has already forced 224 promotions to be changed or withdrawn over the past year due to misleading content.
The joint warning also insists that law firms and CMCs must inform clients about any potential free redress option before they commit to paid services.
Failing to do so could not only cost consumers money but may land firms in hot water with their regulators.
Philip made it clear that the SRA will act decisively if firms are found breaching these requirements. “Where we find that clients are not being properly informed or are being misled, we will investigate—and we will take action.”
As the industry awaits the Supreme Court’s decision, the warning serves as a clear shot across the bow: predatory behaviour in the wake of a looming compensation boom won’t go unpunished.
