Car finance claims: Watchdogs warn law firms and claims companies over poor practices

Regulators warn law firms, claims companies and the public over misleading practices and scams in motor finance commission claims

Regulators have warned law firms, claims companies and the public over poor practices and scams in motor finance commission claims – and it has now confirmed one claims management firm has formally agreed to stop taking on new business. With details of an official compensation scheme now under consideration, the spotlight is on how claimant firms are behaving.

The Financial Conduct Authority (FCA) and Solicitors Regulation Authority (SRA) have told firms to follow the rules – or face action – as they prepare to launch a free, official redress scheme. But, as yet, have not issued any formal enforcement notices. 

Some consumers will choose to make a claim themselves when the scheme is launched. Others will want professional representation – and for many, a reputable law firm can be a valuable ally, especially when it’s not easy to work out whether you’ve been treated unfairly. But both regulators warn that some firms are using speculative marketing, hiding fees, or failing to explain free alternatives.

Alex Neill, co-founder of Consumer Voice, said:

“Claimant firms play an important role in helping consumers to level the playing field and get access to justice, so it’s very disappointing to see this bad behaviour. We hope this action by the regulators will deter the rogues and ensure the market works well for consumers.

“We would advise consumers to hold tight while the details of the official redress scheme are still being worked out, as it’s probably not the right time to be signing up with a claims management company or law firm. 

But when the time is right, if you choose to get representation, make sure you ask questions, read the small print and know the red flags. Don’t be rushed into a decision, and only hand over a share of your compensation if you’re confident you’re getting real value in return.”

Have you taken out car finance? Use our free tool to understand what you need to do now. We’ll send you alerts so you know exactly what to do when the scheme is finalised. 

What’s happening now?

In August 2025, the Supreme Court ruled that some motor finance customers could be entitled to compensation, but only in specific cases – for example, where excessive commissions were charged or where discretionary commission arrangements were not properly disclosed. Other types of commission disclosure claims will not succeed.

Following the judgment, the FCA confirmed it will consult on a free-to-access redress scheme for eligible discretionary commission and unfair claims, with a consultation promised by early October 2025. The FCA has said that consumers will not need to use a claims management company (CMC) or law firm to access this scheme.

This comes as both the FCA and the SRA warn that some firms are aggressively marketing their services – and as scammers seek to exploit the uncertainty.

What the regulators are seeing

The FCA has required 225 motor finance promotions from claims management companies (CMCs) to be amended or withdrawn in the past year, many of them were found to be highly speculative and suggesting guaranteed outcomes before any investigation.

One CMC – My Claim Group – has formally agreed to stop taking on new business. The FCA confirmed it has not issued any official enforcement notices to CMCs, but said it will continue to act where poor practice is found. The FCA also confirmed it will not publish the names of other CMCs whose promotions have been amended or withdrawn.

The SRA has 89 live investigations into 73 law firms over potential rule breaches linked to high-volume claims. While not all of these relate to motor finance, similar issues – misleading promotions, poor client consent procedures, and failure to explain costs – are cropping up across volume claims work. Like the FCA, the SRA said it will not name the firms under investigation until due process is complete.

The SRA has also previously warned that “no win, no fee” arrangements are not always risk-free, particularly where insurance cover fails or a consumer leaves a claim part-way through and faces unexpected costs.

Scam alert

The FCA is also warning about a wave of fake compensation calls. Fraudsters are posing as car finance lenders, claiming people are owed money and asking for personal and banking details.

The regulator is clear: there is no compensation scheme yet, and genuine lenders are not contacting customers about payouts. If you get a call like this, hang up immediately, don’t share information, and report the number to Ofcom by texting 7726.

Your rights if you have appointed a firm to represent you

Under FCA and SRA rules:

• Firms must tell you about free alternatives before you sign.
• You can exit an agreement at any time.
• Any fee on exit must be reasonable and reflect only the work actually done.
• Charges and terms must be explained up-front in a way you can understand.

The FCA has confirmed that if it is determined a consumer signed up based on misleading information, it expects the firm to “put things right,” which may include waiving termination fees or refunding costs to restore the consumer’s position.

The SRA emphasises that law firms must take responsibility for how third-party lead generators and introducers recruit clients. If these partners breach rules – for example, through cold calling or high-pressure sales – the law firm remains accountable.

If you think you were misled by an FCA-regulated CMC, complain to the firm first. If unresolved, take your complaint to the Claims Management Ombudsman. For SRA-regulated law firms, unresolved complaints can go to the Legal Ombudsman.

Choosing the right representative

If you decide to use a solicitor or CMC, make sure they:

• Are regulated by the SRA or FCA.
• Explain costs clearly, including how much of any award they will take.
• Set out your right to leave and what you’d have to pay if you do.
• Tell you about any free alternatives, such as the upcoming FCA scheme.
• Provide terms and updates in plain language.

Red flags include cold calls, vague fee structures, claims of “no risk”, and high-pressure sales tactics. A reputable firm should be transparent, answer your questions, and document your consent to representation.

Find out more about your rights when using a claims management company.

What you should do next

A free official compensation scheme for some motor finance claims could be in place next year, but it won’t cover every case. The details of which are still being worked out and, for some consumers, professional representation will still make sense – especially where claims are complex or disputed.

Consumer Voice will continue to update the public as soon as the FCA confirms its decision – and provide guidance on how to claim safely, for free if possible, or with trusted legal representation where needed.

Whether you go it alone or appoint a firm, know your rights, check the facts, and keep control of your claim.

Check if you could be eligible for compensation

The FCA says people who have already complained do not need to do anything. But if you haven’t yet taken action, you are being urged to act now by raising a complaint with your lender.

Use our tool to check whether you could be eligible and, where you are, we will provide you with free template letters to make complaining easy.