FCA faces uphill task to rein in surge in car finance ads

The FCA is reviewing the claims market after concerns about poor practice, but a surge in online ads shows how far it has to go to protect consumers.

Scroll through social media and it won’t take long before you see it: “This FREE check tells you if you could be owed £1,846 in less than 60 seconds.” Or “you could be owed £1,750.” Or “you could be owed £1,658.”

The numbers vary, and are often based on multiple agreements, but the message is the same: click here, sign up, and claim what you’re owed. Click one, and you’ll be served another. And another.

Ads like these are everywhere because millions of people were mis-sold car finance. And in many cases, advertising plays an important role in raising awareness that people may have been affected. The Financial Conduct Authority (FCA) banned discretionary commission in 2021. But it has taken more than five years to set out a scheme to compensate drivers. 

The FCA is now playing catch up to bring misleading ads under control. The regulator has now explicitly highlighted concerns about the widespread use of “free check” tools in car finance advertising, warning that some promotions are misleading or unclear.

In an update published alongside its market review, it said more than 1,000 misleading car finance adverts have now been removed or amended since January 2024. It also said three claims management companies reduced unreasonable fees, while four firms are currently unable to take on new clients and enforcement investigations are underway.

The FCA, along with other regulators, including the Solicitors Regulation Authority, launched a joint taskforce in late March. It said it will take swift action to tackle issues like unsolicited and misleading advertising.

But the problem is far from being under control. Right now there are around 560 active ads on Meta platforms alone promoting mis-sold car finance claims – up from 470 at the same time last week, and down from around 590 over the weekend. The issue is not that these ads exist, but that too many fail to give people clear, balanced information they need to make an informed choice.

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

“Responsible advertising that makes consumers aware of their rights to claim compensation is no bad thing. But the regulator has got to act fast to get a grip on those who are being pushy, misleading or unclear. People should be able to make informed choices about when and how to complain.”

The regulator today published details of its review. While it says it plans to publish early findings later this year, the final report is not expected until May 2027.

Sign up to Consumer Voice to stay updated on the FCA car finance compensation scheme and our challenge to ensure consumers are compensated fairly.

FCA crackdown on claims management practices

The FCA has renewed its promise to crack down on claims firms that are failing consumers, particularly in relation to motor finance claims.

In its latest update, the regulator said it had seen poor practices including misleading social media adverts promising payouts that “don’t stack up”, unfair cancellation fees buried in contracts, and consumers being signed up to multiple firms without meaningful consent. It said some consumers had been left “harassed, confused, potentially misled, and out of pocket”.

Alison Walters, director of consumer finance, said: “CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy.”

The review will focus on what sits behind poor practices across the market. It will pay particular attention to aggressive and misleading advertising and unfair exit fees. It will also look at how people are being signed up – and what causes people to sign up to multiple firms without realising.

In March, we revealed that, based on the analysis of 15 million car finance agreements by a claims verification provider, up to 70% of claims could be duplicates. 

This is not just a problem of CMCs, which the FCA regulates. Poor practice has also been identified by the Solicitors Regulation Authority, which regulates law firms. Aileen Armstrong, SRA executive director, said: “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 interests.”

The FCA has said it will go further on this – looking at whether legislative change is needed and whether firms should compensate consumers if they cause harm.

The regulator also confirmed it will examine whether business models and financial incentives are driving poor behaviour in the sector, including concerns around opaque funding structures and whether firms are providing value for money to consumers.

Confusion over who to trust

We’re waiting to see the final details of the FCA’s planned review. It needs to be clear about how poor practice will be identified and reported so consumers can understand who they should, and shouldn’t, trust. That includes helping people distinguish between firms providing a legitimate service, and those using misleading or high-pressure tactics.

This information hasn’t been easy to come by to date. Consumer Voice recently asked the FCA a simple question: which firms has it taken action against? The FCA refused to say.

We submitted our questions using a freedom of information request. The FCA confirmed it holds the information, but declined to release it, citing legal restrictions, potential prejudice to enforcement, and risks to firms’ commercial interests.

There is a balance to strike here. But without greater transparency, consumers are left to navigate a crowded market without clear signals about which firms regulators have already had concerns about. That makes it harder to separate helpful services from harmful practices. 

At the same time, those consumers are being bombarded with slick advertising designed to push them towards signing up quickly.

The FCA’s own research also suggests many consumers are unhappy with the experience after signing up, with more than a quarter of CMC users saying the fees they paid were unfair.

What to do if you took out car finance 

If you had car finance between 2007 and 2024, you could be owed car finance compensation. While it is important to act, you shouldn’t let slick advertising rush you into a decision. 

The FCA scheme is designed in a way that means you don’t necessarily need to sign up to have your claim represented by a third party. Our advice is to be cautious about using a claims management company at this stage. Some firms – particularly regulated law firms – may offer additional support, but you should be clear on what you’re paying for and whether you need that help. Lenders will need to contact all affected customers in time, but our advice is not to wait to be contacted.

Start by submitting a complaint to your lender. This helps make sure your case is considered and could mean you receive compensation sooner. If you have complained previously and this was rejected before, it’s worth trying again. The rules about who could be eligible have changed and your outcome could be different.

You can complain for free using our free complaint template tool. Some people may choose to use a law firm for extra support, but you should ask the right questions and understand the costs before signing up.

Why we are taking legal action to get more for consumers 

Millions of drivers are owed compensation for car finance mis-selling. The FCA estimates around 12 million agreements could be eligible, and has widely publicised average payouts of about £830. In reality, most people are likely to receive less than this.

Our evidence suggests the current scheme risks leaving many consumers short-changed. That’s why Consumer Voice is taking legal action. The aim is not to stop the scheme, but to improve it, to ensure it properly reflects what people lost.

Neill added: “The scheme is the right way to get money back to millions of drivers. But it has to be done properly. Consumers shouldn’t be left hundreds of pounds out of pocket after waiting years for justice.”

Three lenders have also decided to challenge the scheme – though not because they believe consumers should receive more. 

Sign up to Consumer Voice to stay updated on our action. We want to see a compensation scheme that serves consumers, not lenders.

You can also read our full guide to car finance compensation for everything you need to know.