What Claims Management Companies Do
Claims management companies help people put together and submit financial complaints. They may handle correspondence with lenders, draft letters, organise information and interact with the Financial Ombudsman Service on your behalf.
CMCs are regulated by the Financial Conduct Authority. You can check whether a CMC is FCA-authorised at register.fca.org.uk.
CMCs operate in many areas including car finance, PPI, financial mis-selling, packaged bank accounts, energy claims and others.
Using a CMC is entirely optional. The same complaints can typically be made by consumers directly, for free.
How Claims Management Companies Charge Fees
Most CMCs charge a contingency fee — a percentage of any compensation received. This means you pay nothing unless compensation is received, but the fee can be a significant share of any amount paid.
Common fee structures range from around 25% to 40% of compensation, plus VAT. On a compensation payment of £2,000, a 30% fee plus VAT would be £720.
Some CMCs also charge upfront fees or administration fees. Read any agreement carefully before signing.
By law, FCA-authorised CMCs must tell you clearly, in writing, that you have the right to make a complaint yourself for free before you agree to use their services. If a company does not tell you this, that is a serious concern.
The FCA publishes maximum fee caps for certain types of claim. Check the FCA website for the current rules.
Advantages and Disadvantages
Some people choose to use a CMC because they prefer not to deal with correspondence themselves, find the process daunting, or simply want someone else to handle it.
The main disadvantage is cost. Paying a percentage of any compensation means receiving significantly less than you would if you had complained directly.
There is no reliable evidence that using a CMC consistently leads to better outcomes than complaining directly. The Financial Ombudsman Service assesses all complaints by the same standards.
Another consideration: if a CMC submits complaints on your behalf, they may use templates or standard approaches that do not fully reflect the specifics of your situation. A well-written personal complaint from you may be just as effective.
FCA Guidance on Claims Management Companies
The FCA regulates claims management companies and sets standards for how they must treat customers.
FCA rules require CMCs to: tell customers they can complain for free; provide clear fee information; not use misleading advertising; not use high-pressure sales tactics; and treat customers fairly.
If a CMC breaches these rules, you can report them to the FCA.
Check any CMC's FCA authorisation before engaging with them. Do not use a firm that is not FCA-authorised to provide claims management services.
Free Complaint Routes
In the UK, all consumers have the right to complain directly to a financial firm at no cost.
If the firm's response is unsatisfactory, the complaint can be referred to the Financial Ombudsman Service for free.
The FOS is independent and its process is designed to be accessible to consumers without professional help.
Citizens Advice, MoneyHelper and the FOS website all provide free guidance and, in some cases, template letters to help you structure a complaint.
Using free routes means any redress you receive stays with you in full.
The Financial Ombudsman Process
The Financial Ombudsman Service (FOS) is a statutory body set up by Parliament to resolve disputes between consumers and financial firms. It is free to consumers.
The FOS assesses complaints based on what is fair and reasonable, taking into account the law, regulatory rules and good industry practice.
The FOS does not favour complaints brought by CMCs over those brought by consumers directly. It assesses the evidence and facts of each case.
If the FOS upholds a complaint, it can direct the firm to pay redress. Its decision is binding on the firm if you accept it.
Questions to Ask Before Signing Any CMC Agreement
Is the company FCA-authorised? Check register.fca.org.uk.
What is the exact fee, including VAT?
Does the fee apply to the full amount of any redress, or only a portion?
Are there any upfront or administration fees?
What are the cancellation terms? Can you cancel and if so, at what cost?
How long will the process take?
Who will handle your complaint — a qualified person or a general call handler?
Has the company told you that you can make this complaint yourself for free? (They are required to.)
Understanding Costs and Deductions
If you use a CMC and receive compensation, the deduction can be substantial. On £5,000 of compensation, a 30% fee plus VAT would be £1,800 — leaving you with £3,200.
If you had complained directly and received the same amount, you would receive the full £5,000.
Understanding this difference helps you make an informed choice about how to proceed.
There are circumstances where some people genuinely benefit from having professional help — for example, very complex cases, or where someone finds the process extremely difficult to manage. But for most standard financial complaints, free routes are fully accessible.
Making Informed Choices
The most important thing is that you have complete information before deciding how to proceed.
Read the FCA guidance on your specific type of complaint. Read the FOS guidance on how complaints are assessed. Read what Citizens Advice says about the process.
If you then decide you would prefer to use a CMC, you can do so with full awareness of the costs and alternatives.
AskFin's position is that informed consumers make better decisions. Our role is to provide clear, educational information — not to steer you towards any particular choice.