Battle lines are being drawn in the increasingly-fraught motor finance dispute between financial regulators and claims companies.

The Financial Conduct Authority has urged motorists not to bother with law firms and claims management companies when they seek compensation. But the regulator upped the ante last month when it revealed it was spending £2m on an advertising campaign directing people seeking redress to a free template complaint letter on the FCA website.

The Consumer Legal Association (CLA), which describes itself as the representative body for the claimant industry, says the regulator is deliberately steering people away from getting legal advice to establish their rights.

The CLA said the ad campaign does not acknowledge how ongoing legal challenges and the partial suspension of the scheme has made the position more difficult for claimants to navigate. There is also concern that the FCA’s much-heralded scheme does not capture all those who may be entitled to compensation, and those people are being driven away from exploring their options.

David Whitmore, chair of the CLA, said: ‘The FCA has stated that ‘You don’t need to pay to claim’ and that claimants may pay for ‘a service you don’t need’. Those statements risk presenting professional legal advice as unnecessary before someone understands their case. This is about choice, and claimants should decide whether they want help.’

The FCA’s own polling has revealed that around a quarter of motor finance consumers lack confidence in making a complaint without a CMC or law firm. The CLA has now written to the Treasury Committee to raise its objections to what it perceives as a campaign against claimants.

It points out that under the scheme, it is the lenders who make the initial decisions about whether a claimant is eligible and how much compensation they should receive. Claimants can pursue their claim directly for free but could seek independent legal advice to understand the decision, check the amount offered and challenge any possible error within the one-month deadline.

‘A claimant could be wrongly told they are not eligible, offered too little compensation or miss the deadline to challenge the lender’s decision,’ Whitmore added. ‘That risk is particularly concerning for claimants with low financial confidence, limited digital skills or other vulnerable circumstances.’