Credit, Collections & Insolvency News
The Financial Conduct Authority (FCA) and the Solicitors Regulation Authority (SRA) have warned claims management companies (CMCs) and law firms over excessive fees in motor finance commission claims.
The regulators emphasised that firms must ensure consumers do not have multiple representatives and must charge reasonable termination fees.The FCA has also written to lenders setting out the potential actions they should take to address this issue.
The FCA says that if a consumer wishes to switch representatives or terminate an agreement, firms must do so without charging unfair fees. Any fees charged must be reasonable and reflect the work done. Fees charged by FCA-regulated CMCs must provide fair value in line with the Consumer Duty.
Following scrutiny from the FCA, two FCA-regulated CMCs have agreed to change their termination fee policies, protecting 70,000 consumers from excessive charges.
Similarly, SRA-regulated law firms have been reminded that they should act in their clients’ best interests. They can only bill in line with the agreement the client signed up to before work started and any ‘termination’ fee must have been clearly stated up-front. Duplicate claims should be resolved through efficient and cost-effective co-operation.
Sheree Howard, Executive Director of Authorisations at the FCA, said “We’ve been clear about our expectations of CMCs. Before starting any case, firms should confirm a customer hasn’t already instructed another representative. Where someone signed up without fully understanding what they were agreeing to, we wouldn’t expect a termination fee to be charged. If any fee is applied, it must be reasonable, and reflect the work done.”
Sarah Rapson, Chief Executive of the SRA, said ‘”With potentially millions of claims in this area, protecting consumers is our priority. We expect firms we regulate to abide by the SRA’s clear standards and regulations. You must act in the best interest of your clients, including those who may choose to terminate their agreement or who may have signed up to multiple firms.
“Firms operating here should be under no illusion as to the requirements. We have reminded them of their responsibilities on a number of occasions, including in a recent Warning Notice and in our updated claims management guidance. We will continue to engage with firms in this area and take action where required.”
