The Financial Conduct Authority (FCA) has launched a review of the claims management market following concerns about poor practices affecting consumers.
The regulator said it should examine issues including aggressive marketing, misleading promoting and cases where consumers are signed up without clear consent, particularly in motor finance claims.
While some claims management corporations may go in favour of consumers, dealers have often complained of “ambulance chasers” trying to capitalise on the regulation of the motor finance industry.
The review will assess whether consumers receive fair value, how fee structures and incentives influence behaviour, and whether the end-to-end customer journey delivers good outcomes.
It is going to also consider differences across regulatory regimes and whether firms are operating with the right permissions.
The FCA said it should work with partners including the Solicitors Regulation Authority (SRA), using supervisory and enforcement powers where needed, and will recommend legislative changes if required.
Consumers are being let down
Alison Walters, director of consumer finance on the FCA, said claims management corporations and law firms can play a task in helping consumers secure compensation but standards are inconsistent.
She said: “CMCs and law firms may also help consumers secure compensation they’re owed. But too often consumers are being let down, eroding trust in firms that must be supporting them and damaging the economy.”
She said the review will assess how the market is functioning and added: “This review will give us a transparent picture of how the market is working and galvanise the further actions which might be needed.”
Aileen Armstrong, executive director on the SRA, said the problems require coordinated motion across regulators.
She said: “Once they work well, claims management services can profit consumers. But we’re concerned about poor practices and behaviours that will not be taking care of consumers’ best interest.”
She said the SRA will work closely with the FCA on the review, describing it as a cross sector issue requiring joined up solutions.
A positive step, but reflects wider structural issues
Responding to the announcement, Shanika Amarasekara, chief executive of the Finance & Leasing Association (FLA), said the review is a positive step but reflects wider structural issues out there.
She said the credit industry has faced ongoing challenges from claims management firms monetising complaints processes, particularly in motor finance. She said: “For years, the whole credit industry, including motor finance lenders, has endured claims management corporations monetising the complaints process.”
She highlighted cases of multiple representation, adding: “Within the motor finance commissions redress scheme, we’re seeing cases of multiple representation coming to light where as much as 21 claims management or claimant legal firms are vying for a share of any redress paid out on a person criticism.”
Amarasekara said closer coordination between regulators might be critical, particularly involving the Solicitors Regulation Authority, and pointed to the present joint taskforce with the FCA and other bodies.
She said uncertainty within the regulatory framework is contributing to the size of claims activity within the UK compared with other markets, with ongoing reform of the Financial Ombudsman Service expected to deal with a few of these issues.
This Article First Appeared At www.am-online.com
