The FCA launches market study into claims management services

On 19 May 2026, the UK’s Financial Conduct Authority (FCA) launched a market study into claims management services in Great Britain, publishing its Market Study Notice and proposed terms of reference. 

The study will examine the extent to which the conduct of claims management services – including both professional representatives (claims management companies (CMCs) and legal professionals), and lead generation firms – is having an adverse effect on consumers and competition. 

The FCA’s study, on which it will work closely with the Solicitors Regulation Authority (SRA), has been prompted by its “significant concerns” about the impact of certain behaviours on consumer outcomes. The FCA notes that poor practices have left consumers “harassed, confused, potentially misled, and out of pocket”. 

The study will consider the “root causes” of these practices, and represents a further step in the FCA’s increasingly interventionist approach to the claims ecosystem – signalling a willingness to examine not just individual firm conduct, but structural drivers of poor consumer outcomes. 

This development is likely to resonate with those who have direct experience of CMCs’ practices of this kind, including, in our experience, defendants facing opt-in group litigation. More broadly, the market study forms part of the FCA’s stated objective, alongside the Financial Ombudsman Service (FOS) and the Government, of creating "a fairer, more proportionate and predictable redress system". 

Background

The study follows a period of increasing regulatory attention on the sector, particularly in relation to the motor finance market. 

The FCA has already taken significant action. Since January 2024, it has removed or amended over 1,000 misleading motor finance claims adverts. Four firms cannot currently take on new clients, and enforcement investigations are underway. 

The FCA has also established a joint regulatory taskforce alongside the SRA, the Information Commissioner's Office (ICO) and the Advertising Standards Authority (ASA), to tackle harmful behaviours, including misleading sign-up processes and problematic funding models. This followed the FCA and SRA’s joint warning to firms on multiple representatives and excessive termination fees, in the motor finance market.

In parallel, the FOS has raised its own concerns about the quality of professionally represented cases. Between April and December 2024, 47% of complaints were brought by professional representatives, which should have meant that those complaints had a “considerably higher success rate”. However, only 26% of those cases were found in favour of the consumer, compared to 38% of those brought directly by consumers for free. 

In an attempt to incentivise CMCs to submit “better-evidenced” claims and to consider their merits “more diligently”, in April 2025 the FOS introduced a fee of £250 for professional representatives to refer complaints to its service (subject to an annual free allowance, and reduced to £75 where referrals were upheld). The impact was striking: the proportion of new cases brought by representatives fell from 47% to just 6.8%. 

The FOS has more recently also expressed concern regarding professional representatives’ use of AI, citing examples of submissions which contain “multiple inaccuracies”. 

The announced FCA market study goes a step further, and will be a “comprehensive” review of claims management services in relation to i) financial services and financial products claims; and ii) housing disrepair claims. While the FCA has also indicated that, “motor finance aside, there are no other mass redress events on our radar”, the breadth of this market study suggests a recognition that the way the claims market currently operates has the potential to generate future large-scale issues.

Key concerns identified by FCA

The FCA’s supervisory work has identified several behaviours that raise concerns around consumer outcomes, which are “most acute” during periods of large-scale claims activity. These include:

• Aggressive advertising, such as unsolicited texts or emails (which have led to 6 million complaints to the ICO);
• Misleading or unclear advertising, including failing to explain that claims can often be pursued by consumers for free and “promising returns that don’t stack up”;
• Large numbers of similar claims being progressed with limited claim-by-claim assessment, increasing the risk of speculative or weak claims being submitted in bulk;
• Complex or unclear fee structures, including a lack of transparency when signing up consumers;
• Limited consumer understanding, e.g. on fees, termination charges and likelihood of success; and
• Business models focused on scale rather than outcomes.

These themes reflect a broader concern on the part of the FCA that current market dynamics may incentivise the generation and pursuit of high volumes of speculative or weak claims, with limited claim-by-claim assessment, rather than supporting positive consumer outcomes. 

In order to understand whether features of the claims management market incentivise these behaviours, the market study plans to focus on five key themes: 

• Consumer journey: the level and nature of lead generation and advertising activities and the extent it leads to consumer harm, and whether consumers are supported and informed throughout the consumer journey.
• Pricing-related harms: how price levels and structures are set, the impact of price caps, and whether pricing practices are driving poor consumer outcomes.
• Business model incentives: whether the business and funding models in the market, including “opaque offshore funding structures”, are driving poor conduct.
• Risks created by low financial and operational resilience: whether firms are financially and operationally resilient enough to support consumers.  
• Incentives created by the regulatory landscape: how the differences in how firms are regulated across the market affect consumer outcomes. This theme is particularly significant given that, according to the FCA's data, 75% of leads from FCA-regulated lead generators are ultimately delivered to SRA-regulated law firms, raising questions about the interaction between different regulatory regimes across the claims supply chain.

Wider market impact

The FCA notes that such practices not only adversely affect individual consumers, but also lead to “unnecessary cost” for those facing “poor quality or meritless claims”. This can cause firms to be hesitant about launching new products or servicing customers innovatively, all of which creates a “drag on investment, productivity and growth”. 

For firms, this is notable because it positions the volume and quality of claims as a matter of regulatory concern, rather than solely a litigation issue. In practice, firms may recognise issues associated with high-volume claims submissions of variable quality, and the operational burden of responding to such claims at scale. The FCA's willingness to examine these issues at a structural level, rather than solely through firm-by-firm supervision, marks a notable shift in regulatory approach. 

Next steps

The FCA has invited written representations on the planned scope and key themes of the study by 19 June 2026, and representations on the matters specified in the Market Study Notice (including on whether to make a market investigation reference to the CMA) by 30 June 2026. 

The FCA will issue information requests to firms in June 2026 and expects to publish interim papers with early findings in December 2026, which may be accompanied by consultations on proposed regulatory changes. 

The FCA is conducting the study under its Enterprise Act 2002 powers, which enable it to compel information from firms both within and outside its regulatory perimeter (including SRA-regulated law firms and lead generators).

A final market study report will be published by May 2027.

If the FCA finds the market is not working well, the FCA has indicated that it will consider the full range of tools available to it, which may include: 

• Using its regulatory, competition, supervisory and enforcement powers – including, where warranted, a market investigation reference to the Competition and Markets Authority.
• Making recommendations to HM Government or other bodies, such as the SRA.

In practice, this could result in interventions affecting claims origination and marketing practices, fee structures, and the funding models underpinning large-scale claims activity. As such, firms (and corporates more generally) may wish to monitor developments closely, and consider engaging both with the study, and any consultation process that follows. 

Freshfields has extensive experience advising on mass claims and redress events, including navigating the interplay between courts, regulators and the FOS.  Freshfields also recently submitted a response to the FCA’s consultation on proposed changes to the redress system (CP26/9). 

If you would like to discuss any of the issues raised in this blog post, please do not hesitate to get in touch.