Law firms and claims management companies under review by the UK’s FCA over concerns of poor marketing practices and misleading victims.
The UK’s Financial Conduct Authority (FCA) is launching an investigation into the claims management market over concerns that firms are misleading financial scandal victims about their compensation.
The review will examine “the root causes of poor practices across the market, like aggressive marketing, misleading advertising and unfair exit fees”.
Claims management companies (CMC) have targeted suspected victims of financial incidents like the car finance scandals and housing disrepair.
The probe will look at the “end-to-end consumer journey, including lead generation, marketing and advertising” as well as consumer outcomes.
The FCA said: “Other concerns include consumers being signed up without their consent – without clear, upfront explanations of the implications of signing up or ticking a box, for example on social media adverts – or by multiple representatives, potentially causing confusion and delaying compensation.”
The watchdog confirmed it has so far removed or amended 800 misleading ads; helped over 28,000 consumers exit contracts without fees; and has protected more than 500,000 consumers by ensuring the reduction of fees it deemed unreasonable from three CMC firms.
Recently, a high profile ad was banned by the FCA after it was found to be using unauthorised clips of MoneySavingExpert founder Martin Lewis, making misleading claims about car finance compensations.
“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,” said Aileen Armstrong, executive director of strategy, innovation and external affairs at Solicitors Regulation Authority, who work with the FCA.
“We will work closely with the FCA on this important review. This is a cross-sectoral problem that requires joined-up solutions.”
The investigation, which will include scrutiny of lead generators, will result in ‘robust action’ if parties are not forthcoming.
The FCA argued that legislative change is needed, and confirmed it will make recommendations to the government regarding subjecting CMCs and law firms to stronger compensation mechanisms when they have caused harm.
