FCA reviews claims management sector in ‘significant’ intervention

According to the regulator, the review, which the FCA said it will undertake in “close collaboration” with the Solicitors Regulation Authority (SRA) and other regulators, has been driven by concerns that consumers are being failed by a number of claims management companies (CMCs) and law firms involved in the claims space.

Jonathan Cavill and Anthony Harrison of Pinsent Masons said the review is one of the most significant regulatory interventions in the claims management sector since CMCs came under FCA authorisation in 2019.

Cavill said: “Its scope – covering lead generation, marketing, fee structures, regulatory perimeter issues and the end-to-end consumer journey – means that virtually every participant in the claims management supply chain will need to take stock.”

Harrison added: “What stands out is the emphasis on joined-up regulation. The FCA and SRA are working together with explicit coordination, and the tone of their joint statements is unambiguous: poor practices will not be tolerated, and enforcement action will follow where cooperation is not forthcoming.”

The FCA said its review will examine whether consumers receive fair value, including competition on price and quality, and whether existing price caps remain fit for purpose, particularly where free-to-use redress mechanisms already exist. It also plans to look at financial incentives to see whether fee structures, funding and insurance arrangements create conflicts of interest or lead to poor conduct and consumer outcomes. Other issues the regulator will explore in its review include whether lead generation, marketing and advertising practices deliver good outcomes for consumers, and whether different approaches across different regulatory regimes affects firm behaviour, and whether some firms are failing to obtain the appropriate permissions.

The FCA’s review follows on from earlier interventions in relation to practices in the claims management market.

In January 2025, the FCA issued a portfolio strategy letter (5-page / 200KB PDF) in which it set out areas where CMCs were falling short of expectations. In March this year, the FCA set up a joint taskforce with the SRA, the Information Commissioner’s Office (ICO) and the Advertising Standards Authority (ASA) “to crack down on poor practice in motor finance claims” specifically.

The FCA’s review also follows the Court of Appeal’s refusal of permission to appeal against a decision to allow a novel claim, brought by Vanquis against a firm of solicitors engaged in bringing high-volume financial mis-selling complaints, to proceed. That refusal means that the business model and due diligence practices of those engaged in high volume complaints may be subject to close examination when the case comes to trial.

The FCA has confirmed that its new review will be broader in scope than just reviewing practices in relation to motor finance claims, albeit the conduct of some CMCs and law firms in this area has been a particular catalyst for this more wide-ranging regulator intervention.

The FCA has warned it expects full, prompt and open cooperation from all firms engaged in the review. It has signalled that it will take robust enforcement action where this is not provided. It has also indicated it will make recommendations to the UK government for legislative change where needed, including whether CMCs and law firms should be subject to stronger compensation mechanisms where they cause harm. Further information on the review will be published by mid-May 2026.

Cavill said: “Notable is the FCA's willingness to contemplate legislative change. The suggestion that CMCs and law firms could face stronger compensation mechanisms if they cause consumer harm is a marker of how seriously the regulator views the systemic nature of these issues. This should not be treated as a routine supervisory exercise – the regulatory and reputational stakes are high.”

Cavill and Harrison also noted that, for regulated financial services firms, the FCA's review presents a timely opportunity to engage proactively with the regulator. Firms that have encountered problematic conduct, whether that is multiple representation of the same consumer, speculative or meritless claims, or evidence that consumers were signed up without proper consent, should consider bringing that intelligence formally to the attention of the FCA and, where law firms are involved, the SRA, they said. Both regulators have made clear they are seeking evidence from across the market, and Cavill and Harrison said regulated firms are uniquely well-placed to provide it, given the volume and granularity of their day-to-day interactions with CMCs and law firms.

At the same time, they also cautioned that regulated firms must be careful not to conflate the conduct of the CMC or law firm with the merits of the underlying claim. A consumer may have a legitimate complaint even where the firm acting for them is behaving poorly, and firms must continue to assess each complaint on its own merits, according to Cavill and Harrison.

In any event, they advised firms to monitor the review closely and consider contributing to any subsequent consultation so the regulator has visibility of their concerns.