Using a claims management firm but unhappy with it? Your cancellation rights explained as regulators crack down on sector

Two claims management firms have agreed to change their exit fee policies after action from regulators the Financial Conduct Authority (FCA) and the Solicitors Regulation Authority (SRA). Two others have agreed not to take on clients or to advertise until they can show the FCA they comply with its rules. These firms have not been named.

Meanwhile, the SRA has closed five firms down "to protect the public" and is investigating 76 law firms involved in mass claims, such as those based on the car finance mis-selling scandal. Though again, the exact firms have not been named.

Why regulators are clamping down on claims firms

The FCA and SRA, alongside the Information Commissioner's Office (ICO) and the Advertising Standards Authority (ASA), have expressed serious concerns about the behaviour of some firms making compensation claims on behalf of consumers. These concerns include:

• Misleading advertising. For example, unrealistic claims about success rates and the value of potential compensation, or ads that create a false sense of urgency. The FCA says it's had over 740 of these ads removed or amended since January 2024. If you spot a misleading ad (whether it's online or elsewhere), you can report it directly to the ASA.

• Not providing enough information before you sign up. This includes not being clear about your right to cancel the agreement, what exit fees are involved, or the free alternatives that might be available.

• Excessive fees. The FCA says it's particularly concerned about firms charging high fees when you try to exit a contract after realising you weren't given the full picture when you signed up.

• Spam marketing. This includes concerns over the volume and accuracy of marketing sent out to consumers, as well as data protection issues. The ICO says that, since January 2025, it's received over 230,000 complaints via its spam reporting service about unsolicited and unlawful direct marketing practices linked to car finance mis-selling claims.

Signed up to a claims firm? Your rights if you want to cancel

If you signed up to a law firm but you want to get out of it, the legal position can be tricky, as it depends on the contract you have with the firm and the circumstances around it. But the key thing to bear in mind is that you're not powerless. Here's what you need to know:

• A firm can charge you a termination or cancellation fee if this is set out in your contract – but the fee must be fair and reasonable. Firstly, any exit fee must have been "clearly stated upfront in your agreement", according to the latest guidance from the SRA – so it if wasn't, you'd have grounds for a complaint.
  
  In addition, a law firm can "only bill reasonable charges for work they can show they have done on your case, and to which you agreed, in line with the agreement you have with them". If you can't see how the firm got to a specific figure, contact it and ask it for a detailed breakdown.
  
  The SRA's guidance for law firms says that what's reasonable "will depend on a range of circumstances", including how much work the firm has done on your case, the market rates for that work, and to what extent you were informed of and consented to the charges. Crucially, firms must be able to prove that their charges are reasonable if challenged – so the onus is on them.
  
  The FCA has echoed this guidance with respect to claims firms – it says on its website that any fee "should be reasonable and should reflect the work the firm has already done".

• Don't think the exit fee was made clear upfront or find it excessive? Complain to the firm directly in the first instance. You'll need to give the firm a chance to sort things first. It'll need to give you its final response within eight weeks.
  
  If you're making a complaint about a claims firm and need help, you can call the Claims Management Ombudsman on 0800 023 4567 for guidance. If you're complaining about a law firm, you can use the Legal Ombudsman's template to help put your complaint together.

• Not happy with the firm's response? Escalate your complaint to the relevant ombudsman. For claims firms, this is the Claims Management Ombudsman (part of the main Financial Ombudsman Service). For law firms, it's the Legal Ombudsman.
  
  Both are free and their processes work in similar ways – they'll look into your complaint and, if they find you've been treated unfairly, will tell the claims firm to put it right, including asking it to pay you compensation where appropriate.
  
  To work out which type of firm you're dealing with, check its complaints policy – this should tell you where to escalate your complaint. Alternatively, look at the bottom of the firm's website – if you see a reference to the Solicitors Regulation Authority (SRA) or an SRA number, it's probably a law firm. You can double check this by searching the SRA register. Otherwise, you're likely dealing with a claims firm.