FCA to Review Claims Management Practices

The Financial Conduct Authority (FCA) has announced a formal review of claims management practices, following concerns that consumers are being failed by some claims management companies (CMCs). The review is being conducted in collaboration with the Solicitors Regulation Authority (SRA) and other regulatory partners.

Context to the Review

While the FCA has recognised that CMCs and other ‘professional representatives’ can play a legitimate role in helping consumers secure compensation, it has grown increasingly worried that poor practices across the CMC industry are leading to poor customer outcomes. This reflects similar concerns that have been building within the regulated firms who have to handle complaints from CMCs, often in high volumes.

Many of these issues were highlighted by both the FCA and the Financial Ombudsman Service (FOS) in their consultation on modernising the consumer redress system, which acknowledged the concern that CMCs often bring meritless or poorly evidenced complaints, with only 25% of cases brought by professional representatives being upheld by the FOS (compared to 37% of cases brought directly by consumers).¹ In April 2025, following analysis that CMCs represented 47% of cases referred to it in the course of 2024, the FOS began charging CMCs a referral fee of £250 per case to refer complaints to its service where those referrals were not upheld, and £75 where referrals were upheld.² CMCs retained the right to make 10 free referrals.

These concerns overlap with some of those raised by the SRA in relation to firms within its regulatory perimeter.

More recently, in March 2026, a joint regulatory task force was established to tackle the poor handling of motor finance claims. Poor practices place a considerable time and resource burden on regulated firms, which face large numbers of poorly substantiated cases that can overwhelm their complaints handling functions, even if the complaints themselves are ultimately unsuccessful.³ The burden is compounded when these unmeritorious complaints, having been rejected by the relevant firm, are subsequently referred to the FOS for determination.⁴

The FCA’s Objectives 

The review will look at what the FCA has termed “the root causes of poor practices across the market,” and highlights aggressive marketing, misleading advertising, unfair exit fees, and consumers being signed up without their informed consent (for example on social media). As a result, consumers may experience confusion and, in cases where the complaint is valid, compensation may be delayed.

In light of these concerns, the review will examine the following key areas:

1. Providing fair value for customers, including whether existing price caps remain fit for purpose, particularly where free-to-use redress mechanisms exist.
2. Financial incentives, such as fee structures, funding and insurance agreements, and whether these create conflicts of interest or drive poor outcomes.
3. The full consumer journey, from lead generation and marketing through to the conclusion of a claim.
4. Regulatory consistency, including whether existing gaps between different regulatory regimes (i.e. CMCs regulated by the FCA versus law firms regulated by the SRA) enable firms to exploit loopholes or operate without permissions.

Where the FCA believes that legislative change is required, it will make recommendations to the relevant bodies, including whether CMCs and law firms should be subject to stronger compensation mechanisms if they cause harm to consumers.

The Future for CMCs

Both financial services firms and consumers should welcome the FCA taking action in relation to those CMCs who fail to comply with their regulatory obligations and act in a manner which does not prioritise good customer outcomes. 

Although the recent motor finance redress issues have thrown these concerns into sharper focus, these problems are longstanding and extend beyond that sector. The FCA has identified housing disrepair claims as an additional area of concern, but this has been a widespread issue across financial services, with the CMC industry expanding because of PPI and looking for new targets since then. It should be noted that consumers may, in some specific cases, benefit from the services of a properly managed and compliant CMC. As the FOS regularly highlights, consumers can make a complaint themselves without using a CMC or law firm. 

While implementation of FOS referral fees in April 2025, as noted above, appears to have reduced the volume of cases referred to the FOS by professional representatives⁵, this measure alone is unlikely to fully address the root cause of these failings. The FOS has also proposed a further ‘registration’ stage between a complaint being referred and it being investigated, which should further filter out poorly evidenced claims submitted by CMCs. However, the FCA remains concerned with unscrupulous practices within the claims management industry⁶, underscoring the need for robust reform.

The key question moving forward will be whether this review results in meaningful reforms to industry practices or merely leads to further high-level expectations which may go unheeded by the unscrupulous. 

Next Steps:

Further information on the review is expected to be published by mid-May 2026.

¹ CP25/22: Modernising the redress system, pg. 49, FCA, July 2025

² Financial Ombudsman Service to start charging professional representatives to refer cases, FOS, 7 February 2025

³ Regulators join forces to tackle poor claims management practices, FCA, 6 October 2025

⁴ For further reading on FOS reforms, see our previous article by Hywel Jenkins and Ian Thomas, which includes a dedicated section on CMCs.

⁵ Claims brought by professional representatives to the FOS reduced from 30,800 in Q1 2025/2026 to 2,100 in Q3 2025/2026. 

⁶ FCA to review claims management practices, FCA 6 May 2026