The Financial Conduct Authority (FCA) has warned consumers to be cautious of misleading social media adverts promoting car finance compensation claims, amid growing concerns about the practices of some claims management companies (CMCs) and law firms.
The regulator said it had identified a rise in advertisements disguised as independent financial advice that are in fact paid promotions designed to encourage consumers to sign up for motor finance claims services.
Alison Walters, director of consumer finance at the FCA, said consumers should understand that compensation claims can be pursued without paying a third party.
“Accessing compensation is free, and people don’t need to use a claims management or law firm to get what they’re owed,” she said.
“If they choose to, it should be a genuine and well-informed choice, not one made because of a misleading advert.”
According to the FCA, some firms have been presenting promotional content as impartial advice, while others have used logos, imagery and references linked to well-known brands, media outlets and public figures to imply endorsement where none exists.
The regulator recently banned adverts from one claims management company that used edited and unauthorised video clips of consumer finance campaigner Martin Lewis to make misleading claims about potential motor finance compensation payouts.
The FCA said it has already secured the removal of advertisements from one firm and is continuing to work with regulatory partners to tackle poor practices across the market.
The warning comes as millions of consumers consider whether they may be eligible for compensation linked to motor finance agreements.
The FCA stressed that consumers can submit complaints directly without charge and warned that using a CMC or law firm could result in fees exceeding 30% of any compensation awarded.
Regulators have also raised concerns about wider conduct within the claims management sector, including unsolicited marketing communications, misleading sign-up processes and excessive exit fees.
Reports received by the FCA include consumers being enrolled without their knowledge after interacting with online “free compensation checker” tools, alongside cases where firms have made it difficult for customers to leave agreements or challenged them with disproportionate charges.
The regulator said firms are expected to remove misleading content, ensure consumers are treated fairly and, where appropriate, return affected customers to their original position, including unwinding contracts free of charge.
The FCA’s wider crackdown has already resulted in more than 1,000 misleading adverts being removed or amended since January 2024. More than 28,000 consumers have also been able to exit contracts without charge following regulatory intervention.