The Financial Conduct Authority (FCA) has issued a warning to drivers about misleading social media advertisements promoting car finance compensation claims. The regulator expressed growing concerns over the conduct of some claims management companies and law firms.
Misleading Adverts Targeting Drivers
The FCA stated that it has identified an increasing number of adverts that appear to offer independent financial guidance but are actually paid promotions designed to encourage consumers to sign up for motor finance claims. Some firms have used advertising that fails to clearly explain that consumers can make complaints themselves free of charge.
Alison Walters, director of consumer finance at the FCA, said: “Accessing compensation is free, and people don’t need to use a claims management or law firm to get what they’re owed. If they choose to, it should be a genuine and well-informed choice, not one made because of a misleading advert.”
Car Finance Scandal Affects Millions
Earlier this year, it was announced that drivers affected by the car finance scandal—which could involve up to 12 million people—were owed an average of £829 each. One firm has already agreed to remove all of its adverts. The FCA, working with regulatory partners, will take further action to prevent consumers from being duped into signing up without the right information.
Firms Must Take Corrective Action
Firms are required to remove any content that misleads consumers and prevents them from making informed decisions. They are expected to take action to ensure that any consumers misled into signing up are restored to their original position, which may include unwinding contracts for free.
Reports of poor practice include unwanted texts or emails, which have driven 6 million complaints to the Information Commissioner’s Office this year. Consumers are being misled by adverts or signed up without their knowledge or consent—for example, by clicking a 'free compensation checker' on social media.
Aggressive Tactics and Exit Barriers
Firms are also making it difficult for consumers to exit agreements where they have been misled, aggressively pursuing fees, charging unfair exit fees, or making exaggerated claims for work already done. Additionally, firms are failing to keep clients updated, explain their options fully, or make clear that consumers can take a complaint to the relevant Ombudsman for free.
