FCA and SRA issue joint warning to firms representing motor finance commission claims

The regulators are reminding CMCs and law firms[2] that they are expected to have robust checks in place to confirm consumers have not already instructed another representative. The FCA has also written to lenders[3] setting out the potential actions they should take to address this issue.

If a consumer wishes to switch representatives or terminate an agreement, firms must do so without charging unfair fees. Any fees charged must be reasonable and reflect the work done.

Fees charged by FCA-regulated CMCs must provide fair value in line with the Consumer Duty. Following scrutiny from the FCA, 2 FCA-regulated CMCs have agreed to change their termination fee policies, protecting 70,000 consumers from excessive charges.

Similarly, SRA-regulated law firms should act in their clients’ best interests. They can only bill in line with the agreement the client signed up to before work started and any ‘termination’ fee must have been clearly stated up-front. Duplicate claims should be resolved through efficient and cost-effective co-operation.

Sheree 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. If any fee is applied, it must be reasonable, and reflect the work done.'

Sarah Rapson, chief executive of the SRA, said: 'With potentially millions of claims in this area, protecting consumers is our priority. We expect firms we regulate to abide by the SRA's clear standards and regulations. You must act in the best interest of your clients, including those who may choose to terminate their agreement or who may have signed up to multiple firms.

'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. We will continue to engage with firms in this area and take action where required.'

The FCA and SRA will continue to monitor the conduct of CMCs and law firms, and act where poor practices are identified. Poor onboarding and due diligence practices, lack of information to consumers and misleading advertising has contributed to multiple representation.

The FCA’s increased proactive monitoring of financial promotions has led to the removal or amendment of more than 800 misleading adverts by FCA regulated CMCs since January 2024. The FCA recently opened an investigation into a CMC[4] following concerns about its advertising and sales tactics in relation to potential motor finance commission claims.

Ahead of the FCA introducing a proposed motor finance redress scheme[5], it will be launching an advertising campaign on 5 February to warn consumers about scammers pretending to be car finance lenders and falsely claiming that people are owed compensation, despite there being no motor finance compensation scheme in place yet.

Consumer guidance

• Consumers do not need to use a CMC or law firm to claim compensation, and they could lose a significant chunk of any money they are owed if they do.
• Consumers may choose to be represented, but they must have first had all the relevant information on their options to make an informed choice.
• Where claims have more than 1 representative, firms should work together and consult with the customer to agree the sole representative.
• Consumers who sign up with more than 1 representative and then choose to cancel may have to pay a fee.
• Any termination fee should be reasonable, reflect the work done, and be itemised.
• Consumers who believe they weren’t given the facts when they signed up or have been unfairly charged by a CMC or law firm should first complain to the firm. If dissatisfied with the response, they should take their complaint to the Claims Management Ombudsman or Legal Ombudsman.

Notes to editors

FCA:

• In October, the FCA confirmed it would be looking into exit fees[6].
• Five FCA regulated CMCs have agreed to make changes to their processes following scrutiny, including not taking on new clients until they are able to show they comply with FCA rules.
• Separately, using powers under the Consumer Rights Act 2015 and, for the first time, under the Digital Markets, Competition and Consumers Act 2024, the FCA, working closely with the SRA, has required 9 law firms to provide information about their exit fees. Some law firms also provided responses voluntarily. This information has been shared with the SRA.
• We issued a letter to CMCs[7] on 7 October 2025.

SRA:

• The SRA’s updated claims management guidance[8] includes expectations relating to termination fees and multiple representation.
• The SRA has also published a guide to consumers[9] and has set out its expectations for firms with clients with motor finance commission claims[10], as well as a Warning Notice to firms[11] about ‘no win, no fee’ practices. Between August and November 2025 the SRA undertook a mandatory declaration exercise for law firms operating in the high-volume consumer claims (HVCC) sector, which includes motor finance commission claims. The declaration asked firms to confirm compliance with SRA rules.
• From September to November 2025 the SRA conducted an extensive period of engagement around 5 challenges raised in an HVCC discussion paper[12].
• At 31 January 2026, the SRA had 89 open investigations relating to 71 law firms that manage high-volume consumer claims. It has also closed 7 firms working in this area.