The UK’s growing car finance scandal — already one of the largest consumer financial issues in recent memory — has entered a new phase as debate intensifies around how motorists pursue their claims. A report found that some contracts with claims management companies (CMCs) or solicitors charge up to £175 an hour exit fees if a client changes their mind after the 14-day cooling off period.

While the findings have raised valid concerns about transparency and costs, some in the industry say the headlines miss the broader picture. Legitimate CMCs claim that they help drivers to discover mis-sold car loans and receive compensation – in particular, where a driver doesn't know they're entitled to do so, the process is difficult, or the driver would be unable to do so themselves.

Instead, the companies say they provide efficiency, reasonable terms and transparency — often enlisting the help of lawyers to make sure every case is properly screened at the outset.

What the FT Investigation Revealed

Drivers who signed contracts with legal firms or CMCs to pursue car finance compensation may be liable for substantial exit fees if they change their minds. In some contracts, clients who withdraw after the cooling-off period are billed hourly rates that can run into thousands of pounds, even if no compensation is ultimately recovered.

The figures have also fuelled further allegations that CMCs are charging excessive fees and costs to the claimant. Many consumers have expressed anger at the reporting that, following years of mistreatment, firms established to help victims of mis-selling are instead cashing in on them.

But legal firms and claims management companies themselves, along with some of their representatives who responded to the FT investigation, have said the story is incomplete — and ignores the expertise, access and support of reputable CMCs.

A Widespread Scandal

The controversy comes against the background of a huge car finance scandal engulfing the motor finance industry. For years, millions of motorists were mis-sold loans tainted by undisclosed car finance commission arrangements between lenders and brokers. These deals incentivised brokers to inflate interest rates, leaving customers unknowingly paying more than necessary.

As awareness of the scandal has grown, so too has the number of car finance claims being filed. Many drivers are now seeking car loan compensation through solicitors, the Financial Ombudsman Service, or with the help of CMCs. At stake are billions of pounds, with estimates that the industry could be on the hook for billions in payouts if the claims are upheld and the Supreme Court sides with consumers.

Why Claimants Turn to CMCs

In response to the negative portrayal of CMCs, Andrew Franks, head of Reclaim247, offered an alternative perspective:

“We charge no more than you would if you went directly to a solicitor. However, because we work with a panel of solicitors, we can recommend the one best suited to your claim — whether that depends on jurisdiction, claim value, or lender. We actually work very closely with Bott & Co. Whether you approached them directly or used our free claim checker — which helps identify all your historical agreements — both options operate on a no-win, no-fee basis, and the deductions would be identical.”

This insight highlights that CMCs are not simply middlemen inflating costs. Instead, they provide value-added services by linking clients to the most suitable legal counsel, identifying all relevant agreements (which can include several loans over many years) and streamlining the claims process.

A Complex Process for Many

Claiming car finance claims can often feel like a bit of a battleground for the motorist. Understanding the fine print of loan contracts, identifying where undisclosed car finance commission was paid, and calculating fair compensation all require specialist knowledge. This is where CMCs argue they provide genuine help — ensuring that claims are properly investigated and submitted, increasing the chances of success.

Furthermore, as Franks points out, the no-win, no-fee model ensures that clients pay nothing upfront and that deductions for successful claims are broadly consistent whether they approach a solicitor directly or through a PCP claims company.

Moving Forward

Amidst all of this wrangling over fees and practices, one thing is crystal clear. The car finance scandal has left a trail of customers who are more than justified in feeling angry and bewildered. If you are looking to claim car loan compensation, you need to know for certain that your claim is in capable hands and will be dealt with professionally and justly.

Motorists considering a claim should carefully read contracts, understand their rights to cancel, and ask questions about potential costs before proceeding. Those who prefer to handle their own claim can contact their lender directly or approach the Financial Ombudsman Service — but others may still benefit from the support of a well-known CMC through the process.

As the Supreme Court prepares to deliver its decision on related cases, and the Financial Conduct Authority continues its oversight, the car finance industry — and those seeking redress — remain in the spotlight.