The Financial Conduct Authority is teaming up with a fleet of regulators to crackdown on misleading claims firms in the motor finance saga – even as the sector’s displeasure on the redress scheme rumbles on.
The City watchdog will join the Solicitors Regulation Authority (SRA), Information Commissioner’s Office and the Advertising Standards Authority to tackle misinformation pedelled by claims management companies (CMCs).
In August, Lord Justice Reed took a swipe at CMCs ahead of handing out the ruling on the landmark motor finance case.
Reed said CMCs had gathered a batch of sign ups with many “under the impression that they had a valid claim”.
“But it was too early to form any view as to whether a valid claim lay on the basis of the Court of Appeals’ decision, as that decision was under appeal, and it was only once [the Supreme] Court decided the appeal that it would become clear whether the Court of Appeal had decided the cases correctly or not,” he added.
Claims firms had also faced criticism for charging high exit fees for consumers who had signed up without the correct information.
Paul Philip, chief executive of the SRA, said: ”The risks and issues facing consumers in this area of the market are unprecedented, and we are using all the levers at our disposal to protect consumers, identify poor practices and hold law firms to account.”
Motor finance scheme comes under fire
It comes as the Financial Conduct Authority pushes forward with its redress scheme, which according to its own will be expected to cost between £9bn and £18bn.
Other industry figures have suggested the projected cost may be an overestimate.
“We still don’t know what was behind the [FCA’s] suggestion,” said the director of motor finance at the Financing and Leasing Association told the Financial Times.
“They haven’t shown the workings . . . We think it should be less than £9bn.”
The City watchdog’s consultation paper is expected for as early as next week, where it will provide deeper insight into the industry-wide redress.
Any hit is expected to fall far short of the £44bn that had previously threatened to disrupt the banking industry.
Last week, embattled lender Close Brothers announced a fresh £33m provision for motor finance related to “historical deficiencies”.
Lloyds has reserved a total £1.2bn for the saga, whilst Santander is on the hook for £295m.
Automakers have also been forced to set aside funds, with BMW allocating £200m and Ford £61m