Author: Russell J Kelsall

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FCA publishes letter to claims management companies inviting them to review financial promotions relating to motor finance claims

On 4 August 2025, the UK Financial Conduct Authority (the FCA) published a copy of a letter dated 31 July 2025 that it sent to claims management companies (or CMCs) inviting them to review their financial promotions relating to motor finance claims.

This letter says that between 1 January 2024 and 30 June 2025, the FCA’s engagement with 14 CMCs result in 225 financial promotions being amended or withdrawn.

The FCA also identified a number of concerns including:

– exaggerated claim values;

– falsely implying that refunds have already been secured or are guaranteed;

– creating a false sense of urgency;

– indiscriminately suggesting the contact relates to knowledge of a consumer’s motor finance agreement; and

– signing up consumers without their consent.

CMCs have therefore been reminded to “avoid using clickbait-style promotions or language that suggests a guaranteed outcome before any investigation has taken place. Additionally, given the potential for a redress scheme to be introduced, firms should not use language that implies a false sense of urgency. Such messaging may place undue pressure on consumers and could be considered misleading under the FCA’s rules and the Consumer Duty“.

The FCA expects CMCs to ensure “that all financial promotions are clear, fair, and not misleading, and that they accurately reflect the nature and status of any potential claims”.

The FCA has asked firms to take the following action:

– review and revise financial promotions;

– avoid misleading outcome guarantees;

– remove false urgency; and

– monitor and update promotions regularly.

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FCA says it will consult on a proposed motor finance compensation scheme

Earlier today, on 3 August 2025, the UK Financial Conduct Authority published a press release and a statement setting out its plan to consult on a proposed motor finance compensation scheme.

The devil is always in the detail (particularly on a complicated topic like this) so we will need to wait to see what the FCA says (a consultation is likely to be published in October 2025 with a six week period for responses).

If a scheme is made then the FCA says it expects most compensation payments to be ‘no more than £950’ and for payments to be made ‘in 2026’.

But there are many points raised, and questions left unanswered, by the FCA’s announcement. And some parts of their announcement require a lot of work and buy in from Treasury.

The FCA has also published a transcript of a call with market analysts which took place at 5pm on 3 August 2025.

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UK Supreme Court hands down judgment in motor finance commission case

Earlier today, on 1 August 2025, the UK Supreme Court published a press release and its judgment in Hopcraft & Hopcraft v Close Brothers Limited; Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance; Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2025] UKSC 33 dealing with claims relating to commissions paid by lenders to dealers introducing customers entering into motor finance agreements.

The Court decided that:

– for both the claims under the tort of bribery, and in equity, there needed to be a fiduciary duty between the dealers and the customers;

– in typical relationships like these, the dealers did not owe the customers a fiduciary duty sufficient to give rise to a liability in the tort of bribery, or in equity;

– the claims in tort and equity in all three claims would be dismissed;

– in Johnson, where there was also a claim under the unfair relationship provisions in Sections 140A to 140C of the Consumer Credit Act 1974, the Court acknowledged that those provisions were “highly fact-sensitive“. There mere fact that there has been no disclosure, or only partial disclosure, does not necessarily mean a relationship was unfair;

– however, in Johnson there were three factors which the Court found to be relevant to support its conclusion that the relationship was unfair: (a) the size of the commission, (b) the fact that the dealer’s documents did not properly explain the dealer’s role and (c) it was questionable to what extent a customer could have been expected to read and understand the lending documents.

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FCA publishes policy statement setting out changes making it easier for borrowers to re-mortgage

Earlier today, on 22 July 2025, the UK Financial Conduct Authority published a news article, a press release and a policy statement setting out its changes to the the FCA Handbook, including to the Mortgages and Home Finance: Conduct of Business Sourcebook (or MCOB), aiming to make it easier for borrowers to re-mortgage.

What’s changed?

The FCA has made the following changes:

– mortgage advice and interactive dialogue: the FCA has removed the interaction trigger at MCOB 4.8A.7R(3) and associated rules and guidance in MCOB 4 and MCOB 8. This means interactions between firms and their customers should not automatically trigger advice.

– affordability assessments when reducing the mortgage term: the FCA has removed the requirement for a full affordability assessment when reducing a mortgage term by introducing MCOB 11.6.3R(6). But firms must still consider affordability under their responsible lending policy and the consumer duty and PRIN 2A.

– amending affordability assessments when re-mortgaging: the FCA has amended the modified affordability assessment in MCOB 11.9 to include new mortgage contracts with new lenders where it is more affordable than either (a) the borrower’s current mortgage or (b) a new mortgage product that is available to that customer from their current lender.

– retiring guidance: the FCA has retired guidance in FG13/7 (dealing fairly with interest-only mortgage customers who risk being unable to repay their loan) FG24/2 (guidance for firms supporting their existing mortgage borrowers impacted by the rising cost of living) (and there are some new provisions in MCOB 13.2.1AG, MCOB 13.3.8AR and MCOB 13.3.8BG).

– Gibraltar: the FCA has added MCOB 4.1.2ER to make it clear that these changes apply to any Gibraltar-based mortgage lenders who may want to lend within the UK in the future.

When do these changes come into force?

These changes come into effect straight-away.

Why has the FCA made these changes?

The changes made by the FCA aim to allow borrowers to:

– find it easier to reduce their mortgage term, helping to lower the total cost of borrowing and reduce the risk of their repayments extending into retirement;

– more easily re-mortgage with a new lender (which should help them access cheaper products); and

– be able to discuss options with their mortgage provider and get advice when they need it.

The FCA has removed guidance which has “served its purpose” to reduce the regulatory burden.

These changes are part of the FCA’s first steps to simplify its rules and increase flexibility. The FCA says the “Consumer Duty sets clearer, up-to-date standards in financial services“. The changes to the FCA’s rules, including MCOB, aim to provide “greater opportunity for innovation“.

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Financial Conduct Authority publishes consultation paper on its proposed rules and guidance for regulation of unregulated Buy Now Pay Later (now called ‘deferred payment credit’)

Earlier today, on 18 July 2025, the UK Financial Conduct Authority (the FCA) published a press release and a consultation paper, ‘Deferred Payment Credit (unregulated Buy Now Pay Later): Proposed approach to regulation’ (CP25/23), setting out its proposed rules and guidance for regulation of unregulated Buy Now Pay Later (which will now be called ‘Deferred Payment Credit’ or DPC).

The FCA is inviting responses by 26 September 2025.

The key proposals are:

– information requirements: the FCA proposes to introduce new rules requiring customers to be given information to help them make “effective, timely and informed decisions about DPC borrowing before they enter into an agreement, and throughout the lifetime of the agreement” (including if they miss payments) (see paragraphs 3.9 to 3.75 of CP25/23).

– creditworthiness assessments: the FCA wants DPC lending to be affordable. The FCA will expect firms to “do proportionate creditworthiness assessments, so that borrowers can keep up repayments without harming their financial wellbeing“. The FCA proposes to “apply our existing principles-based rules and guidance at CONC 5.2A” (see paragraphs 3.76 to 3.102 of CP25/23).

– high-level standards and existing consumer credit rules: the FCA wants the consumer duty to apply (requiring firms to act to deliver good outcomes to retail customers) and it will also apply some existing consumer credit rules to DPC (see, for example, paragraphs 2.35 to 2.42, and chapter 4, of CP25/23).

– dispute resolution: customers under a DPC agreement will be able to complain and refer their complaints to the Financial Ombudsman Service (see chapter 5 of CP25/23).

– data reporting: the FCA will expect “better and more up-to-date information about the DPC sector and customer outcomes” (see paragraphs 4.18 to 4.40 of CP25/23).

– authorisation: the FCA proposes to introduce a temporary permissions regime while firms apply for a relevant authorisation from the FCA (see chapter 6 of CP25/23).

Like anything with consumer credit, the devil is always in the detail. For example, the FCA proposes that the key provisions on pre-contractual information will be set out in CONC 4.2A. There are proposed new rules on continuous payment authorities in CONC 4.6.2AR. There are also proposed new rules in CONC 7.20 dealing with information to customers about missed payments and giving notice before taking certain steps. The aim of these proposed rules is to make disclosures and documentation more meaningful and accessible to customers, whilst reducing unnecessary burdens on firms.

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Financial Ombudsman Service announces change to compensatory interest levels

Earlier this week, on 15 July 2025, the Financial Ombudsman Service (the Ombudsman Service) published a press release and a policy statement, following a consultation, setting out its decision to change the level of compensatory interest it awards where it upholds a complaint.

The key changes will be:

– If a complainant can show actual loss, their actual loss will be considered when making the money award so that the complainant “is restored to their original financial position”;

– To compensate a complainant from being kept out of their money, the Ombudsman Service will continue to award compensatory interest. But instead of awarding 8% a year, it will award “a time-weighted average of the Bank of England base rate plus one percentage point” and this rate “will generally apply to the period from when the complainant was unreasonably deprived of the money, to the payment deadline” set by the Ombudsman Service; and

– If a firm fails to pay any award by the date set out in the award, a rate of 8% will be used after the deadline date for payment until it is actually paid.

The Ombudsman Service proposes to implement these changes from 1 January 2026 (but the implementation date will be confirmed “in due course”).

This is a significant step forward and re-balances what has always been a penal rate awarded by the Ombudsman Service. In 2018, I wrote a case report in Goode: Consumer Credit Reports on Carrasco v Johnson [2018] GCCR 16001 saying that the Ombudsman Service had “developed a practice of awarding interest at 8% a year” and submitted that practice was flawed because there was “no clear legal basis for the FOS to award interest at 8% a year which, given the base rates, is likely to punish firms who are required to provide redress”. I said that decision should force “a re-think of the FOS’s current policy of awarding interest at 8% a year”. Seven years on, such a re-think has finally happened and cannot be implemented a moment too soon.

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FCA publishes a statement on key considerations for any consumer redress scheme for motor finance commissions

Earlier today, on 5 June 2025, the FCA published a statement entitled ‘Key considerations in implementing a possible motor finance consumer redress scheme’. 

The key points from the statement are:

– If the FCA proposes “an industry-wide consumer redress scheme“, it’ll set out rules on how to assess claims and calculate redress.  The aim of the scheme would be to make it “easy for consumers to understand and participate in, without needing to use a claims management company (CMC) or law firm“.

– The FCA has been “speaking with consumer groups, firms and industry trade bodies to get their views on important issues to consider if we do introduce a redress scheme“.  If the FCA decides to propose a redress scheme, it’ll consult on why and explain how it thinks a scheme could work. 

– Given the pre-consultation engagement, the FCA “may decide to have a shorter than normal consultation window (for example, 6 weeks)“.

– There will be seven key principles:

(1) comprehensiveness: the scheme should be as wide “as possible so consumers don’t have to go elsewhere, like court“;

(2) fairness: the approach (both on breach and redress) should be “fair to consumers and firms“;

(3) certainty: providing finality for both firms and consumers;

(4) simplicity and cost effectiveness: easy for consumers to participate and the cost of delivering the scheme should be proportionate for firms;

(5) timeliness: resolve the majority of claims “within a reasonable timeframe“;

(6) transparency: consumers should receive clear explanations of decisions and data on the progress of the scheme should be publicly available; and

(7) market integrity: support the ongoing, long-term availability of high quality, competitively-priced motor finance.

– The FCA acknowledges that there can be tensions between these principles and it will aim to get the balance right.

– Scope of a redress scheme: some features to consider are: (a) opt-in or opt out and (b) calculating redress must be “fair to consumers who’ve lost out” and “ensure the integrity of the motor finance market” (and the FCA acknowledges it has seen some “highly speculative figures by some CMCs and law firms“)

– The FCA continues to say that it’ll “confirm within 6 weeks of the Supreme Court judgment whether we’re proposing to introduce a redress scheme. If so, we’ll also set out timings for when we would issue a consultation“.

– If the FCA proposes to introduce a scheme, the final rules for any scheme would “be in 2026“.  The FCA is also keeping under review whether to make any changes to its Handbook.

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HM Treasury publishes ‘Phase 1’ consultation on consumer credit reform, and response to feedback on plans to regulate BNPL

Earlier today, on 19 May 2025, HM Treasury published:

– a press release and a ‘Phase 1’ consultation paper on reform to the Consumer Credit Act 1974;

– an update to its consultation and its response to the feedback to its consultation on regulating buy-now, pay-later products (BNPL); and

– a news story on its proposals to regulate buy-now, pay-later.

The ‘Phase 1’ consultation on reform seeks views on information requirements, sanctions and criminal offences. The deadline for responding is 21 July 2025.

On BNPL, HM Treasury “intends to lay the [statutory instrument] before Parliament shortly after this responsible is published”. Once the SI is made, the FCA will then have 12 months to draft, consult on, and finalise its rules for BNPL Lending. BNPL products will then be regulated from mid-2026. The FCA will shortly publish a consultation on its rules.

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Advertising Standards Agency bans a diesel emission claims ad implying an association with, or endorsement by, the UK Government

On 16 April 2025, the UK Advertising Authority (the ASA) published a decision on whether a post on X (formerly Twitter) about claims relating to diesel emissions published by Cambridge Corporate Consultants Ltd t/a The Claims Guide (The Claims Guide) was misleading. The ASA decided it was. 

The post on The Claims Guide’s X post stated: “Owned a BMW, Citroen, Ford, Peugeot, Volvo, or Jaguar & Land Rover diesel car? Manufacturers are accused of cheating emissions tests […] Over £193 MILLION has been paid. Find out if you qualify”.

The post included an image of black text on a white background that stated: “Diesel Emissions Claims […] Make a claim Drivers can potentially make a diesel emissions claim if they owned or leased a diesel car Claims are expected to [sic] worth up to £10,000 each […] Eligibility is dependent on the exact make and model, so should be checked using the official reg checker” and “Check Your Car In Seconds. Get Up To £10,000 With A Diesel Claim”. The post linked to a page of the The Claims Guide’s website headed “Diesel Emissions Claims”. 

The ASA challenged whether the ad misleadingly implied that The Claims Guide was associated or endorsed by the UK Government. 

The Claims Guide’s response was that “any implication of association with or endorsement by the UK Government was unintended”. 

The ASA upheld the challenge. It decided:

– the image had the same “typography, the black and white colour scheme, and simple layout” as the Government’s website;

– these elements (and others) were “distinctively associated with the GOV.UK website and therefore would give consumers the impression that the company “The Claims Guide” was officially approved, endorsed or authorised by the Government to help consumers make diesel emission claims”;

– this was reinforced by the reference to “the official reg checker”(when there was no such checker). 

The advert was therefore banned because it “implied that The Claims Guide was approved, endorsed or authorised by the UK Government, and that was not the case”.

This is a useful and robust decision from the ASA. It ensures the advert cannot be used again by The Claims Guide. But there are many similar adverts on social media, often linked to diesel emissions or motor commissions. Firms who advertise in such a way, or make other misleading claims, may therefore face engagement from the ASA along with their own regulator. 

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Butterworths Financial Regulation Service – updated commentary on CONC published

Issue 139 of Butterworths Financial Regulation Service has now been published. I’ve reviewed and revised Chapters 1 to 4 (covering the introduction, and CONC 1 to 3) and Chapters 10 to 16 (covering CONC 9 to CONC 15) of Division H of Volume 4. This commentary is up to date as at October 2024.

The changes include:

– re-writing the existing commentary in Chapter 1 to consider some key areas of focus for the Financial Conduct Authority including (a) financial promotions and (b) supporting borrowers in financial difficulties;

– updating the commentary on CONC 3 to deal with the FCA’s recent social media guidance;

– revising the guidance on CONC 14 to explain the background which led to those provisions; and

– updating the text to consider the impact of the consumer duty.