The Financial Conduct Authority has opened a formal review of claims‑management companies (CMCs) after the sector rode a wave of demand triggered by a massive car‑finance mis‑selling scandal. Working with the Solicitors Regulation Authority, the FCA will probe aggressive marketing, misleading adverts and unfair exit fees that may leave consumers worse off, and could prompt stricter licensing requirements for firms operating without proper authorisation.

The probe arrives weeks after the FCA launched a £9.1bn redress scheme for borrowers allegedly sold unsuitable finance. Yet many CMCs and “no‑win, no‑fee” law firms continue to charge up to 30 per cent of any payout, touting claims on social‑media ads that often lack clear consent. Regulators will assess fee caps, compensation mechanisms for consumers and the role of lead generators or opaque.

The FCA says it will recommend legislative changes if existing caps prove ineffective and will coordinate with other regulators to close gaps exposing consumers to unsolicited sign‑ups. Recent enforcement actions have already stripped 800 misleading adverts and freed 28,000 customers from contracts, while 109 investigations into law firms remain open. The review promises a clearer market picture for vulnerable borrowers and tighter oversight in the sector.