Regulator scrutiny grows as compensation activity accelerates after launch of redress scheme

LONDON — The FCA is to review conduct across the claims management sector [1] relating to the car finance scandal, as the regulator probes concerns around aggressive marketing, opaque fees and spiralling complaints [2] as motorists flock to the newly launched motor finance redress scheme to chase compensation.

The announcement comes just weeks after the City watchdog formally launched its industry-wide compensation framework on March 30 [3], which sparked a flurry of enquiries relating to car finance claims, PCP claims or a potential car finance refund.

Reports in the national press claimed the regulator is looking into whether certain firms used misleading advertising, high pressure sales tactics or inadequate disclosure practices [4] when signing up consumers seeking to claim compensation relating to historic motor finance agreements.

Focus shifts from lender liability to claims handling standards

The FCA’s latest enforcement action is one part of a much wider investigation into mis-sold car finance, and while lenders and finance providers have been the primary focus up until now, it is beginning to look like claim execution is the next battleground as claims volumes increase across the sector throughout 2026.

The wider scandal is centred around discretionary commission structures previously used throughout the motor finance sector, where brokers and dealerships could influence the interest rate given to a customer, potentially raising their borrowing cost and not disclosing it.

The controversy has become one of the UK’s largest consumer finance issues in recent years, with banks and finance providers already setting aside substantial sums to cover expected payouts 2026 liabilities.

That has fuelled a sharp increase in online searches for terms including car finance claim, PCP refund and car finance refund check as drivers attempt to determine whether they may be eligible for compensationdue to car finance mis-selling.

FCA distinguishes between poor practices and legitimate support

Although the regulator has issued warnings about conduct in parts of the sector, this review is not an outright dismissal of claims management companies. The FCA has stated for some time now that consumers can complain to lenders themselves, without third-party representation. However, many drivers still use regulated claims specialists to help them retrieve documents, assess eligibility and handle complaints - particularly where agreements may be older or if there are multiple finance companies.

Industry representatives argue it is important not to treat all firms alike. Many regulated CMCs say they provide valuable assistance for consumers navigating what can often be a complex and time-consuming process.

That is especially relevant in cases where paperwork is missing, lenders have changed ownership or customers are unfamiliar with financial complaint procedures.

Some firms also argue professional support can be particularly important for vulnerable consumers, including individuals facing language barriers or financial difficulties.

Transparency expected to become key battleground

Consumer groups and industry watchers anticipate growing importance in transparency standards as scrutiny is placed under the microscope across the market.

The FCA’s review is said to involve the investigation of cancellation fees, double claims submissions and whether or not consumers understood what they were signing up for with representatives hunting down car finance compensation on their behalf.

Experts say motorists considering a PCP compensation claim or other car finance claim should carefully review how fees are structured, confirm whether a business is FCA-authorised and understand cancellation terms before proceeding.

With redress compensation activity now gathering pace under the FCA car finance scheme, the regulator seems to be aiming to raise standards across the sector and maintain access to professional support for those who wish to use it.

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References:

1. The FCA is to review conduct across the claims management sector - https://www.thetimes.com/business/companies-markets/article/fca-reveiw-claims-market-car-loans-scandal-xp9qb5tws
2. the regulator probes concerns around aggressive marketing, opaque fees and spiralling complaints - https://www.theguardian.com/business/2026/may/06/uk-regulator-launches-review-of-aggressive-claims-management-firms-amid-compensation-concerns
3. the City watchdog formally launched its industry-wide compensation framework on March 30 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
4. Reports in the national press claimed the regulator is looking into whether certain firms used misleading advertising, high pressure sales tactics or inadequate disclosure practices - https://www.ft.com/content/38c98772-f4eb-4e59-a493-605c9815d869?syn-25a6b1a6=1