CMC Compliance: CMCOB, Audit Trails and the FCA's New Bar

Apr 1, 2026 11:13:38 AM

13 min read

Isometric illustration of a road splitting into two paths, one free and open, one with a toll booth, representing the choice between the FCA's free motor finance redress scheme and using a CMC

Written on: Apr 1, 2026 11:13:38 AM

Read time: 13 min read

Written by: Chris Fortune

Tags : Contract news Legal disputes Recent news

There’s a new tension sitting at the heart of motor finance claims.

On the one hand, the FCA’s redress scheme is built to be straightforward for consumers to use directly. On the other hand, we’re seeing a landgrab of ads, lead forms, “check if you’re owed £X” calculators, and one-click funnels designed to capture consumers before they’ve even clocked they have a free alternative.

That’s why the compliance conversation has changed: theFinancial Conduct Authority isn’t only watching claim values. It’s watching the moment a customer signs up — and whether they understood what they were doing when they did it.

If a consumer chooses to use a CMC (or law firm) when the scheme is free, the bar isn’t “did we put the fee somewhere?” The bar is: did the customer genuinely understand the alternatives, the cost, the right to walk away, and what they were authorising — and can you prove it?

(This is a practical compliance perspective, not legal advice.)

What this blog contains

Why the Free Redress Scheme Changes CMC Compliance Overnight
What the FCA's July 2025 Letter Actually Means for CMC Onboarding
Exit Fees, Termination Rights and What CMCOB Actually Requires
Why Your CMC Audit Trail Won't Survive an FCA Challenge
Positive Friction and CMC Compliance: Where Slowing Down Protects You
Regulatory References and Further Reading

Why the Free Redress Scheme Changes CMC Compliance Overnight

The FCA is explicitly telling consumers the scheme is free to join, and they don’t need a CMC or a law firm to take part.

That single fact rewires what “value” means for a CMC. You’re no longer competing with other representatives. You’re competing with “do it yourself, for free, and keep all the money”. The FCA’s own factsheet warns that if a consumer uses a CMC or law firm, they “could lose up to 36% in fees (including VAT)” out of any compensation they receive.

That “36%” point matters because it’s the difference between your fee and what it costs the customer in reality. It also overlaps with what Solicitors Regulation Authority highlighted in its 31 July 2025 warning: using a law firm or CMC can mean sacrificing “up to 30%” of any award in fees.

In other words: regulators are now speaking directly to the consumer, in plain language, about the trade-off. If your onboarding flow doesn’t mirror that clarity, you’ve created a compliance gap before you’ve even opened a case file.

Zooming into the rulebook, the FCA’s CMC conduct rules already force this issue “up front”:

Summary information has to be delivered in a single page, in a durable medium, in plain and intelligible language — and it must include cancellation rights and any fees payable on termination.
If the claim is the sort that can be taken to a free statutory ombudsman/compensation scheme, the summary must say the customer is not required to use a CMC and can present the claim themselves for free.

This is where the “don’t bury the 30%” point comes from. It’s not just about what you charge — it’s about whether the customer understood, at the right moment, that (a) they can do it themselves and (b) your service will cost them a meaningful slice of any redress.

And the FCA didn’t stop at “tell them”. CMCOB goes further: before entering the agreement, firms must take reasonable steps to check whether the customer has other ways to pursue the claim, ensure they understand those alternatives, seek written confirmation that they don’t want to use them and why, and then record that confirmation and reasoning.

Then, from March 2022, the FCA tightened the pre-contract mechanics again with a requirement that is easy to underestimate until you’re on the wrong end of a dispute: CMCOB 4.3.1R(1A) requires firms to obtain a signed standalone statement (in a durable medium) confirming that the customer is aware of the relevant free-alternative information (CMCOB 4.2.2R(2)(g)/(h)) and still wishes to use the CMC.

This is the compliance “heartbeat” of the new world: the decision to appoint a CMC must be a conscious, evidenced choice — not an accidental by-product of clicking an advert.

One more practical point: the FCA’s consumer-facing guidance also sets out a fee cap for many financial services claims, with a sliding maximum percentage depending on the value of the redress (and a note that the cap may not apply if the claim is pursued in court). If you’re talking about “30%” as a blanket figure, you need to understand when that’s accurate, when it isn’t, and how VAT changes the lived experience of the customer.

What the FCA's July 2025 Letter Actually Means for CMC Onboarding

The FCA’s 31 July 2025 letter wasn’t vague. It was operational. It told firms to review and revise financial promotions, ensuring they are “clear, fair, and not misleading”, and it singled out exactly the behaviours that create harm in motor finance claims journeys.

Specifically, it told firms to remove or amend references to exaggerated claim amounts (especially where figures aren’t representative), avoid “up to…” language unless it is accurately sourced and contextualised, avoid implying refunds are guaranteed, and eliminate false urgency.

It also made clear this isn’t a one-time fix: firms should monitor and update promotions regularly, with governance and sign-off that actually works.

The FCA later quantified how actively it was already intervening: from 1 January 2024 to 30 June 2025, its engagement with 14 authorised CMCs specialising in motor finance claims resulted in 225 financial promotions being amended or withdrawn.

Then, in October 2025, the FCA escalated again with a Dear CEO letter that essentially underlined the same risks — but in even sharper terms. It listed concerns including exaggerated claim values, implied guaranteed refunds, undue urgency, suggesting knowledge of agreements where none exists, and (the big one for this blog) customers clicking adverts, providing details, and being automatically signed up without their knowledge or consent.

This is the key compliance insight: the regulator is treating journey design as a conduct issue, not a marketing issue. If your acquisition flow nudges people into a contract they didn’t realise they entered, your “paperwork later” won’t fix the underlying defect.

That theme has only strengthened. In March 2026 the FCA announced a cross-regulator taskforce to crack down on poor practice in motor finance claims, explicitly repeating consumer advice that the scheme is free, consumers don’t need a CMC or law firm, and those who use one may lose up to 30% of compensation. The same announcement points consumers to the Information Commissioner's Office for nuisance marketing and the Advertising Standards Authority for misleading ads — which shows you how joined-up this scrutiny now is.

There’s also a practical “remediation” sting in the tail: the FCA’s October 2025 letter talks about identifying harm and taking remedial steps, including (where appropriate) contacting consumers and unwinding contracts without charge. If your sign-up process is messy, you may end up paying twice: once in operational disruption, and again in remediation.

Exit Fees, Termination Rights and What CMCOB Actually Requires

If you want to know where complaints will cluster in the next phase of the scheme, look at exits.

As the scheme rolls forward, a meaningful number of consumers will decide: “Actually, I’ll do it myself.” The FCA has been explicit that this is a normal choice.

CMCOB bakes the consumer’s right to leave into the contract itself:

Firms must allow customers to cancel during a 14-day period beginning on the day the agreement is entered into.
After that, firms must permit customers to terminate at any time.
If the customer terminates after the cancellation period, the firm must not charge more than is reasonable in the circumstances and must reflect the work undertaken.

That last line is deceptively simple. “Reasonable” is not “whatever our contract says”. “Reasonable” becomes a question of evidence. If you can’t show what you did, you will struggle to justify what you charge.

This is where procedure becomes money. CMCOB 6.2.1R requires a firm to provide the customer with an itemised bill, in a durable medium, including when the agreement is terminated. The bill must explain what services were provided and how fees/charges were calculated (including, where relevant, by reference to the full amount recovered).

That’s not theoretical. The Financial Ombudsman has explicitly referenced CMCOB 6.2.1 when assessing disputes about fees and poor service — for example, finding that a CMC should have sent an itemised bill detailing fee calculation, and awarding compensation for distress and inconvenience when it didn’t.

There’s also a marketing angle many firms miss: CMCOB rules on “no win, no fee” promotions require fees to be included prominently, and if the firm charges a termination fee outside the cancellation period, the promotion must indicate that and state the fee (or the method of calculation). If your ads are silent on termination fees, you’ve created a mismatch between what the customer thought they were signing up to and what your contract later tries to enforce.

Finally, regulators are now explicitly warning about multiple representation and duplicate fees. In February 2026, the FCA and SRA jointly warned CMCs and law firms to ensure consumers don’t have multiple representatives for the same claim and aren’t charged excessive termination fees; they also note that where someone signed up without fully understanding what they were agreeing to, regulators would not expect a termination fee to be charged.

Why Your CMC Audit Trail Won't Survive an FCA Challenge

Most CMC compliance failures don’t happen because a firm “doesn’t know the rules”. They happen because, when challenged, a firm can’t evidence what actually happened in the onboarding journey.

CMCOB is full of evidencing language: “provide” information in a durable medium, “take reasonable steps” to ensure understanding, “seek confirmation” and then “record” it.

Two bits of FCA text are worth putting on a wall in any firm that onboards clients online.

First, on cancellation and termination (we covered above): the customer can cancel within 14 days and terminate at any time afterwards, and post-cancellation termination fees must be reasonable and reflect work undertaken. Your operational logging is what makes “reasonable” defendable.

Second, on what counts as “signed”. CMCOB guidance says the FCA would not view an agreement as having been signed for the purpose of the “no payment until signed” rule where the customer does no more than send a text/email or tick a box on a website.

Read that again. If your funnel is basically “enter details → tick box → you’re signed up”, you are building on sand. And that’s before you even get to the standalone statement requirement.

Now layer in “durable medium”. The FCA’s own clarification is that a durable medium must allow information to be personally addressed, stored for future reference, and reproduced unchanged. The practical takeaway is simple: if your evidence can be altered, lost, or only exists inside your system with no customer-held copy, you’re creating avoidable risk.

Here’s what the regulator trendline looks like beyond CMCOB:

Under Consumer Duty, firms must include appropriate friction in customer journeys to mitigate harm and give customers the opportunity to understand and assess options.
The FCA’s Consumer Understanding review (March 2026) frames “good practice” as testing communications (before and after changes), using MI like drop-off data, comprehension checks, and documenting what changed and why — i.e., evidence, not vibes.
The FCA’s work on digital design flags that digital journeys can push customers into quick decisions and that firms should analyse journey data to see when customers move too quickly and don’t access key information.

This is why “audit trail” isn’t a back-office nice-to-have anymore. It is the product.

And it’s where the “click-to-proceed vs e-signature vs informed consent” debate gets real. Behavioural research has repeatedly shown that users engage minimally with standard terms:

Bakos, Marotta-Wurgler and Trossen found only one or two out of every 1,000 shoppers accessed licence agreements, and most who did read only a small portion.
Obar and Oeldorf-Hirsch found 74% of participants skipped privacy policies by selecting “quick join” clickwrap, yet almost all still “agreed” to the policies.

So if your compliance defence is essentially “they clicked accept”, you’re leaning on a behavioural fantasy regulators increasingly reject: that consumers read, understand, and meaningfully consent just because the information existed somewhere.

This is also the cleanest place to explain where i agree fits.

The gap isn’t that firms lack documents. The gap is that firms lack credible evidence of informed decision-making at the point of commitment — especially when customers arrive from paid ads, on mobile, in under two minutes.

i agree is designed around that evidencing problem: capturing what was shown, what was confirmed, and producing a record both sides can later rely on (including a sealed audit trail and a customer-held copy of the record).

If you want a deeper dive into “tamper-evident” vs “we logged it in our database”, the internal pieces worth reading are Why impartial systems matter when they sit between you and your client and The problem with marking your own homework.

Positive Friction and CMC Compliance: Where Slowing Down Protects You

“Friction” is one of those words that gets misunderstood because firms have historically used friction against consumers: hard-to-cancel subscriptions, buried contact routes, endless retention scripts, opaque fees. Regulators call that sludge.

But Consumer Duty is explicit that there’s another type: appropriate friction that exists to reduce harm and create space for understanding. In PRIN 2A.6.2R, firms must include appropriate friction in journeys, and PRIN 2A.6.3G clarifies that appropriate friction used to comply with this duty is not an unreasonable barrier — while also warning that unreasonable additional costs can include unreasonable exit fees and charges.

That distinction maps perfectly onto CMC onboarding:

Positive friction belongs at the moment of commitment (before the customer signs up): slow the journey down long enough for them to understand the free alternative, the fee, the right to cancel, and what they’re authorising.
Negative friction is what you must remove at exit: making termination difficult, charging unjustifiable fees, or forcing customers into unnecessary steps once they’ve decided to leave.

This isn’t an abstract design principle — it’s exactly what the FCA was pointing at in its July letter when it criticised false urgency, exaggerated outcomes, and “sign-up without consent” journeys. Positive friction is, in practice, “don’t let a consumer sleepwalk into a claims contract”.

The FCA’s own digital design findings encourage firms to consider whether adding friction can help customers with decisions, and flags “speed over customers’ interests” as an area for improvement. In a motor finance claims funnel, speed is often the conversion tactic — which is precisely why speed is now a regulatory risk.

The operational challenge for CMCs is obvious: you still need conversion. But the direction of travel is equally obvious: conversion that depends on customers not fully understanding what they’re signing is no longer a business model regulators will tolerate.

Done properly, positive friction doesn’t mean making everything slow. It means designing a very deliberate “pause” around the high-impact terms:

Free alternative disclosure + standalone statement.
Fee disclosure (including the real-world fee impact).
Cancellation and termination rights, and what a termination fee actually means in practice.

That’s why i agree naturally sits in this section. It’s a way of introducing the right “slow-down” at the right point — with the audit trail that proves you did it, and the durability that gives the customer a record they can keep.

And if you want the longer behavioural view (without duplicating it here), the internal piece to link is: Why the FCA wants you to add positive friction to your user journey.

Closing thought / CTA: If you’re a CMC handling PCP claims and you want to sanity-check your onboarding against CMCOB and Consumer Duty expectations — especially around the standalone statement, fee transparency, exit rights, and audit trails — have a look at how i agree works or the motor finance claims compliance use case, and if it’s relevant, get in touch.

Regulatory References and Further Reading

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