The Finance & Leasing Association said it is seeing up to 21 claims management companies fighting for a share of motor finance redress for just one individual complaint.
It revealed the figure as the Financial Conduct Authority announced a review of the claims management market, following concerns that consumers are being failed by some claims management companies (CMCs) and law firms.
The review will look at the root causes of poor practices across the market, like aggressive marketing, misleading advertising and unfair exit fees. 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.
Shanika Amarasekara, chief executive of the Finance & Leasing Association (FLA), said: “This is a welcome intervention by the regulator that will create better outcomes for consumers.
“For years, the entire credit industry, including motor finance lenders, has endured claims management companies monetising the complaints process.
“For example, in the motor finance commissions redress scheme, we’re seeing cases of multiple representation coming to light where up to 21 claims management or claimant legal firms are vying for a share of any redress paid out on an individual complaint.
“Problems are particularly prevalent among claimant law firms, so it is imperative that broader regulators such as the Solicitors Regulation Authority work closely with the FCA.
