The City watchdog has threatened enforcement action and new laws to impose “stronger compensation mechanisms” against the claims management market, including law firms that cause harm. The Financial Conduct Authority (FCA) has launched a fresh review of “the root causes of poor practices” across the market, as claims management companies
Maria Ward-Brennan
Wednesday 06 May 2026 11:56 am | Updated: Wednesday 06 May 2026 11:57 am
The City watchdog has threatened enforcement action and new laws to impose “stronger compensation mechanisms” against the claims management market, including law firms that cause harm.
The Financial Conduct Authority (FCA) has launched a fresh review of “the root causes of poor practices” across the market, as claims management companies and law firms come under scrutiny over targeting people over the motor finance scandal.
The FCA, along with the legal regulator, the Solicitors Regulation Authority (SRA), issued several warnings last year around the time of the high-profile Supreme Court judgment.
Now, the regulators will review the market, looking at aggressive marketing, misleading advertising, and unfair exit fees, as well as concerns about consumers being signed up without their consent.
The FCA said the approach to motor finance claims by some of these companies and law firms has put these issues into sharper focus, but added that it is concerned about the handling of other claims, such as housing disrepair, that have also come to light.
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The City regulator said: “We expect full, prompt and open cooperation from all parties we engage in the review. We, with our regulatory and enforcement partners, will take robust action if this is not forthcoming.”
Potential legislative changes on the table
It was added that if the regulator believes legislative change is needed, it will make recommendations to the government, or relevant bodies, to make those firms “subject to stronger compensation mechanisms if they cause harm”.
FCA’s Alison Walters, director of consumer finance, said: “This review will give us a clear picture of how the market is working and galvanise the further actions that are needed.”
The FCA has recently launched a £9.1bn consumer redress scheme for motor finance and has issued several statements in its million-pound marketing campaign, urging consumers to come directly to it rather than these companies.
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