9:49 am, February 5, 2026
The Financial Conduct Authority (FCA) has fired a warning to law firms who are representing clients involved in motor finance commission claims.
The watchdog has teamed up with the Solicitors Regulation Authority (SRA) to make sure that all rules are being followed, as claims continue to build up.
The regulators say that claims management companies and law firms need to make sure that consumers do not have multiple representatives for the same claim and are not charged excessive termination fees.
Firms are also being reminded that they are expected to have ‘robust checks’ in place to confirm that consumers have not already instructed another representative in relation to the same claim.
Where claims have more than one representative, firms should work together and consult with the customer to agree the sole representative, the regulators say.
They add that if a customer wants to switch representatives or terminate an agreement, firms must do so without charging unfair fees and any fees charged must be reasonable and reflect the work done.
The FCA has also written to lenders setting out the potential actions they should take to address this issue.
We’re consulting on an industry-wide car finance compensation scheme.
Here’s an outline of what could happen at each stage under our proposals.
Read more https://t.co/LUNPtGMGCN#CarFinance pic.twitter.com/PL6jKoVc8Z
— Financial Conduct Authority (@TheFCA) October 10, 2025
Consumers who believe they were not given the right information when they signed up or have been unfairly charged are now being advised to complain to the firm directly.
If they are dissatisfied with the response, the regulators say they can take their complaint to the Claims Management Ombudsman or Legal Ombudsman.
The FCA said that following scrutiny, two FCA-regulated claims management companies have agreed to change their termination fee policies, protecting 70,000 consumers from excessive charges.
Similarly, SRA-regulated law firms should act in their clients’ best interests, the regulator said. They can only bill in line with the agreement the client signed up to before work started and any “termination” fee must have been clearly stated up-front.
The two regulators say that duplicate claims should be resolved through efficient and ‘cost-effective co-operation’.
Sheree Howard, executive director of authorisations at the FCA, said: ‘We’ve been clear about our expectations of claims management companies.
‘Before starting any case, firms should confirm a customer hasn’t already instructed another representative. Where someone signed up without fully understanding what they were agreeing to, we wouldn’t expect a termination fee to be charged.
‘If any fee is applied, it must be reasonable, and reflect the work done.’
Sarah Rapson, chief executive of the SRA, added: ‘With potentially millions of claims in this area, protecting consumers is our priority. We expect firms we regulate to abide by the SRA’s clear standards and regulations.
‘You must act in the best interest of your clients, including those who may choose to terminate their agreement or who may have signed up to multiple firms. Firms operating here should be under no illusion as to the requirements.’
Ahead of the FCA introducing a proposed motor finance redress scheme, it is also launching an advertising campaign to warn consumers about scammers pretending to be car finance lenders and falsely claiming that people are owed compensation, despite there being no motor finance compensation scheme in place yet.
The campaign urges people: ‘Don’t rush, be wary.’
Santander takes another motor finance hit
The warning comes as the car finance crisis continues to take its toll on lenders.
Earlier this week, Santander UK announced that it has put another £183m aside to cover costs of the scandal.
The new amount has been ring-fenced alongside the £295m the bank put aside in 2024, having earlier cancelled Q3 results to assess the impact of the FCA’s upcoming redress scheme.
The firm said that ‘there continue to be significant uncertainties as to the nature, extent and timing of redress payments’, before admitting: ‘The ultimate financial impact could be materially higher or lower than the amount provided.’
Elsewhere, Black Horse owner, Lloyds Banking Group, put by another £800m in its third quarter for the affair, which saw its total bill rise to £1.95bn.
