The FCA also warned that continuing use of very poor promotions, would make it unlikely that firms meet the conditions for continuing authorisation, which could eventually lead to them having to close down.
The regulator said since it began oversight of CMCs in April it had reviewed more than 200 CMC adverts in various media and found “widespread poor-practice”.
As a result it has already taken action by banning one promotion where a CMC appeared to be using a celebrity endorsement without the individual’s permission.
Mortgage Solutions also understands the FCA has visited 20 CMCs where it considered the financial promotions were particularly poor.
And it has raised concerns to other firms, resulting in many amending or withdrawing adverts.
It also used the letter to highlight the importance of ensuring financial promotions are fair, clear and not misleading.
Bad practices revealed
The FCA’s review of CMC adverts included all kinds of financial promotions including website pages and social media.
Examples of bad practice include firms that:
- fail to identify themselves as a claims management company;
- fail to state, that the customer could make a claim to a statutory ombudsman or statutory compensation scheme, such as the Financial Ombudsman Service, without using the services of the firm, and without paying a fee;
- appear to give consumers the impression that they would get a better outcome if they use the services of the CMC;
- use the term ‘no win no fee’, but do not set out the fees that the customer must pay;
- include only examples of case studies where the compensation provided to consumers is very high, even though the average amount received by consumers is considerably lower;
- include important information in small font or in a position that is difficult to see, when it should in fact appear prominently in a promotion.
Threat to authorisation
Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said: “Many CMCs play a significant role in helping consumers to secure compensation. But CMCs using misleading, unclear and unfair advertising practices to get business is completely unacceptable.
“We won’t hesitate to take action where we consider that customers are being misled or otherwise treated unfairly by poor advertising.
“Firms should also understand that we will take their compliance with our rules on financial promotions into account when considering applications for full authorisation,” he added.