Ombudsman fees and tighter regulation reshape how compensation claims are handled

LONDON - The UK claims industry is undergoing major change as regulators tighten oversight of businesses involved in the growing car finance scandal, while millions of motorists continue exploring potential compensation for mis-sold car finance agreements.

The FCA car finance investigation has created one of the country’s largest consumer redress programmes in recent years, with lenders potentially facing billions in car finance compensation linked to undisclosed commission arrangements on PCP and hire purchase deals.

Claims sector shrinks as regulation tightens

The number of claims management companies in the UK has fallen sharply over the past decade following the introduction of tighter regulation after the PPI era.

Industry figures show the market has reduced from more than 3,000 firms to fewer than 400 today [1], reflecting higher compliance standards and closer scrutiny from regulators.

Some claims activity has also shifted towards law firms regulated by the Solicitors Regulation Authority, which is separately examining conduct across parts of the compensation sector linked to the car finance scandal.

Although in reduced numbers, professional support is still a consideration for a number of consumers seeking car finance claims and PCP claimsPCP claims through a straightforward car finance refund check, as the legal and regulatory route to compensation becomes ever more complex.

Ombudsman reforms target weak submissions

One of the biggest changes affecting the sector is the Financial Ombudsman Service decision to charge professional representatives for complaints submitted beyond an initial free allocation.

The move is designed to reduce speculative or poorly evidenced submissions while encouraging higher-quality car finance claims supported by stronger documentation and clearer evidence.

Financial firms have argued that responding to large volumes of weak complaints creates major operational costs, even where compensation is not ultimately awarded.

FCA increases scrutiny of claims practices

The FCA has also announced plans for further action against poor conduct within the wider claims market, including concerns around unsolicited marketing, customer data handling and unclear contract terms.

At the same time, regulators have acknowledged that claims specialists can still play a valuable role in helping consumers understand their rights and navigate the FCA car finance compensation process.

Industry experts say consumers considering assistance with a car finance claim or PCP compensation claim should look for firms that provide transparent communication, properly assessed cases and clear explanations of fees and procedures.

Consumers consider next steps as compensation process develops

Ongoing legal proceedings over the FCA car finance scheme have meant that many motorists are in the dark about when claims will start to progress at scale.

With court hearings unlikely before later this year, some consumers are choosing to prepare documentation early, including finance agreements and lender correspondence connected to potential car finance claims and PCP finance claims.

Specialists across the sector say awareness of the car finance scandal is continuing to spread as drivers revisit older agreements involving PCP and hire purchase products. Many are now exploring whether hidden commission structures could entitle them to car finance compensation.

Consumers considering a car finance refund or PCP refund are also being encouraged to review how any representative or support provider handles complaints, fees and communication standards before proceeding.

Legal delays continue to affect payouts 2026

The timetable for payouts 2026 remains heavily dependent on the outcome of legal challenges brought against the compensation scheme by lenders and other parties.

Although the FCA car finance review continues moving forward, uncertainty around the court process means compensation linked to mis-sold car finance and wider car finance mis-selling may still take time to resolve fully.

________

References:

1. Industry figures show the market has reduced from more than 3,000 firms to fewer than 400 today - https://www.ft.com/content/22770250-aac7-4a41-a910-a17cee9f7d13