In a rare joint statement, the FCA and SRA have issued a formal warning to law firms and claims management companies (CMCs) involved in motor finance commission claims.

The focus is on two specific problems: consumers being signed up to multiple representatives for the same claim (in some cases up to four) and firms charging excessive termination fees when clients try to switch or withdraw. This is not the first time the two regulators have acted together on motor finance. In July 2025 they issued a joint warning ahead of the Hopcraft Supreme Court ruling, and in October 2025 they joined forces with the Advertising Standards Authority and the Information Commissioner’s Office to address misleading advertising. The February 2026 statement escalates that concern, focusing specifically on client harm caused by poor onboarding and fee practices.

What the FCA found

The FCA’s review of contracts from SRA-regulated firms found wide variation in fee structures, some of which lack transparency and may be disproportionately high under the Consumer Rights Act 2015.  For example, terms that allow firms to charge both a termination fee and a full success fee if the claim later succeeds. These concerns have been referred to the SRA, whose investigators are already reviewing the material. Two FCA-regulated CMCs have already changed their termination fee policies following scrutiny, protecting around 70,000 consumers. The SRA has confirmed that as of 31 January 2026, it has 89 open investigations relating to 71 law firms in the high-volume consumer claims sector, and has already closed seven firms operating in this space. The FCA has separately opened an enforcement investigation against one CMC following concerns about its advertising and sales tactics. The SRA’s position is clear: firms can only bill in line with the agreement the client signed before work started, and any termination fee must have been clearly stated upfront. Itemisation of charges is expected.

What’s next?

With an industry-wide FCA redress scheme for motor finance still under development, the regulators have made clear this area will remain under intense scrutiny. Firms should have no expectation that high volumes or market complexity will be treated as mitigating factors. The SRA CEO Sarah Rapson has stated publicly that with potentially millions of claims in this area, protecting consumers is the priority. The joint statement also makes clear that where a client has multiple representatives for the same claim, the appropriate remedy is not to charge termination fees but to put the client back in the position they would have been in had proper due diligence been carried out. In many cases, multiple sign-up situations will not support a termination fee at all.

Firms should also be aware of the broader professional negligence risk in this area. As the FCA and SRA draw clearer lines around expected standards i.e. robust onboarding checks, transparent fee structures, and clear client care documentation, those standards quickly become the benchmark against which negligence claims will be assessed. The volume of the sector does not reduce individual professional obligations: it heightens them.

Actions for you:

• If your firm acts in motor finance claims: implement due diligence checks at onboarding to confirm no other representative is already instructed. The regulators have been explicit that many contracts include clauses stating no other representation exists, but firms cannot rely on these without evidence of adequate pre-contract checks. Where a client is found to be multiply represented, resolve the position promptly in consultation with the client – do not seek to retain instructions at the expense of the client’s informed choice.
  
  
• Review termination fee clauses for fairness and transparency under the Consumer Rights Act 2015. The SRA has set out specific behaviours it considers concerning, including charging for work not done, undertaking unnecessary work to increase fees, and charging more than the fee cap permits under the SRA’s Claims Management Fee Rules. Any termination fee should be itemised and reflect actual work done.
  
  
• Ensure fee agreements were clearly explained and signed before work commenced. The SRA’s position is that where a client did not understand what they were signing up to, a termination fee will not be appropriate. Client care letters and letters of authority in this sector warrant careful review to ensure they are clear, compliant, and given appropriate prominence to the client before any work begins.