Law firms running motor finance claims have come out swinging in the face of regulators’ threat to their potential clients.
The Financial Conduct Authority this week outlined details of how as many as 12.1 million deals where unfair commission was paid could be eligible for compensation from lenders. The FCA has been clear in the past that consumers should avoid instructing law firms or claims management companies and instead rely on this scheme.
Announcing the details of the scheme, the FCA said consumers stand to receive an average of £829 in compensation and stressed they can access the scheme for free, rather than pay up to 30% of any award to lawyers. The regulator further upped the ante by making it clear that anyone opting to take civil claims to court in the hope of securing higher compensation will no longer be eligible for the scheme.
Niikhil Rathi, FCA chief executive, said there would be ‘considerable risk and uncertainty’ from pursuing the court route and ‘all law firms are going to have to consider what is in their clients’ best interests’.
The response from firms has been a mix of anger and resolve to continue operating in this market.
Darren Smith, managing director of Courmacs Legal, a firm based in Blackburn dealing with four million car finance claims, said: ‘The FCA’s final scheme is a complete failure for consumer rights. By prioritising lender balance sheets over fair compensation, the regulator has abandoned vulnerable motorists. Lenders are being let off the hook again.
‘Under this scheme, consumers will receive far less compensation than they would get in court because the FCA has accepted a limited set of data selected by the banks themselves which does not reflect the reality of how much consumers were ripped off.’
Kavon Hussain, principal and owner of Consumer Rights Solicitors, which represented claimants in the Supreme Court case last summer that established the unfairness of some commissions, insisted this is not the end of lawyer involvement.
‘We remain committed to protecting our clients and do not rule out any avenues for ensuring they receive their long overdue justice,’ said Hussain. ‘Millions of consumers have been robbed by the banks - institutions spurred on by nothing but their own greed - and the FCA has let them get away with it. The framework the regulator has provided is a mere slap on the wrist for the lenders who will now see this as the cost of doing business. The FCA has largely failed in its duty to protect consumer interests, instead prioritising the bottom lines of major banks.
‘The FCA’s own figures tell the story. Firms will pay an estimated £7.5 billion in redress - a far cry from the £20bn initially proposed - and 12.1 million victims - rather than 14.2 million - will be able to receive redress. The regulator has not delivered justice but rather a discount.’
Coby Benson, solicitor at claimant firm Bott & Co, said the compensation figure promised by the scheme will leave consumers seeking redress elsewhere through the courts where they could receive more.
’The burden on individuals to navigate complex claims alone, particularly where lenders may challenge eligibility or limit payouts, makes independent legal representation more important than ever,’ he said.
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