In its attempt to stop people using claims management companies or law firms to access the motor finance compensation scheme, the City watchdog has kicked off a £1m media campaign.
The Financial Conduct Authority (FCA) is launching a £1m campaign to inform people that they don’t need to use a CMC or law firm to access the industry-wide compensation scheme.
After an explosive Supreme Court case last month, City banks managed to dodge a £44bn bill, but some uncertainty persists following the top court’s ruling in the case of one claimant, which found scope for compensation under the Consumer Duty Act.
As a result, the FCA would look at a redress scheme for customers who had discretionary commission arrangements on their car finance agreements. The scheme is estimated to cost up to £18bn, with compensation likely to be around £950 for claimants.
The City regulator is set to publish its consultation by early October.
However, ahead of the ruling, the legal watchdog, Solicitors Regulation Authority, and the FCA teamed up to issue warnings to law firms and CMCs over ‘poor practices’ in motor finance claims.
The bodies warned that where there is a case, they will team up to “investigate and take action” against the firms in question.
While just as Lord Justice Reed was about to read out loud the court’s decision, he hit out at CMC for jumping ahead of the gun on advertising to consumers about compensation before a ruling was even determined.
The FCA has announced that new research it commissioned reveals that 79 per cent of motor finance customers are aware they may be owed compensation, and 61 per cent are aware of a possible compensation scheme.
However, under half (41 per cent) of those aware didn’t know they would not need to use a CMC or law firm if a redress scheme were introduced.
The watchdog stated that using a CMC or law firm to make a motor finance claim could cost consumers around 30 per cent of any compensation paid.
As a result of its new campaign, which will feature radio and online advertising, the FCA has partnered with influencers to disseminate its message to consumers over the next two months.
Commenting on the campaign, Sheree Howard, executive director at the FCA, said: “We’ll set out plans for a free, easy-to-access motor finance compensation scheme. We’re concerned a significant number of people are unaware you don’t need to use a CMC or law firm to claim compensation.”
“If you do, you could lose over 30 per cent of any money you’re owed,” he added.