The review will probe the root causes of poor practices, including reports of consumers being signed up without proper consent or by multiple representatives, which can delay compensation and cause confusion.

While the controversy surrounding motor finance claims has drawn particular attention to the sector, the regulator has stressed that concerns extend to other areas such as housing disrepair. Despite the FCA setting out its expectations last year, both it and partner regulators continue to identify shortcomings in firm behaviour.

The FCA will scrutinise whether consumers receive fair value, examining competition on price and quality and assessing whether existing price caps remain appropriate, particularly where free-to-use redress mechanisms already exist.

Financial incentives will also come under the microscope, with regulators looking closely at fee structures, funding arrangements and insurance provisions to determine whether these create conflicts of interest or drive poor outcomes. The end-to-end consumer journey, from lead generation through to marketing and advertising, will likewise be examined.

Crucially for audit and assurance professionals, the joint regulatory taskforce established earlier this year to address motor finance claims will also assess firms’ financial and operational resilience. This includes the quality and integrity of accounting and audit practices, signalling that practitioners working with CMCs should anticipate heightened scrutiny of their engagements.

The FCA is collaborating closely with the Solicitors Regulation Authority (SRA) and other partners, and plans to use its supervisory and enforcement powers robustly. Where legislative change is deemed necessary, recommendations will be made to UK government, including the possibility that CMCs and law firms could face stronger compensation mechanisms when they cause consumer harm.

Alison Walters, director of consumer finance, said: “CMCs and law firms can help consumers secure compensation they are owed. But too often consumers are being let down, eroding trust in firms that should be supporting them and damaging the economy. 

“This review will give us a clear picture of how the market is working and galvanise the further actions that are needed.”

The FCA said it will publish further information on the review by mid-May.