UK Regulators Investigate Claims-Management Firms Amid Consumer Concerns
Regulatory Scrutiny of Claims-Management Practices
LONDON, May 6 (Reuters) - UK financial and legal watchdogs are examining practices in the claims-management market following concerns that victims of financial scandals have been hit by unfair exit fees, misleading advertising and overly aggressive marketing.
Joint Review by Financial and Legal Authorities
The Financial Conduct Authority on Wednesday announced a review alongside the Solicitors Regulation Authority because of worries that some law firms and claims management companies, which are supposed to help consumers pursue legitimate claims for redress, are failing consumers.
Concerns Over Fees and Consumer Impact
Regulators have been frustrated by the market that can take at least 30% of any compensation in fees, in part for pursuing motorists eligible for an estimated 9.1 billion pound ($12.4 billion) motor finance redress pot that members of the public are free to access.
Poor Practices Identified
The FCA, which said it was also concerned about claims in areas such as housing disrepair, noted that poor practice included consumers being signed up without consent, without clear explanations of the implications or by multiple representatives, which could delay compensation.
Objectives and Methods of the Regulatory Review
The regulators will examine whether consumers seeking compensation receive a fair deal, whether financial incentives create conflicts and whether firms have appropriate permissions.
Enforcement Actions and Outcomes
The FCA, which started regulating claims management companies in 2019, said it would use its review, supervisory and enforcement powers and that parties that do not cooperate fully and swiftly would face "robust action".
To date the FCA has prompted the removal or amendment of 800 misleading motor finance-related adverts, more than 28,000 consumers have exited contracts free of charge and three CMCs have reduced "unreasonable" fees.
Formal investigations are also underway.
SRA Investigations and Firm Closures
The SRA is investigating 76 law firms that manage high-volume claims and has shut seven.
Exchange Rate Information
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(Reporting by Kirstin Ridley; editing by Barbara Lewis)
