Redress schemes for compensating motor finance consumers could be delayed further after a campaign group brought a legal challenge over the figures being proposed.
Consumer Voice said millions of consumers are being short-changed by several hundreds of pounds and believes the compensation being offered does not properly reflect the harm they have suffered.
The Financial Conduct Authority has set out its plans for two schemes to be accessed by around 12 million people who took out loans to buy cars from 2007 to 2024. Consumers can make a claim if they were not told details of a commission arrangement between the broker and the lender, or where the commission came to at least 10% of the loan value.
The regulator has said that each claimant can expect to receive an average redress of £829 for each motor finance agreement they took out, and have stressed to people they do not have to use a law firm or claims management company.
But the firms remaining in this market insist the redress being offered is too low and the scope of the schemes too small. Campaign group Consumer Voice, which is funded by fees and contributions from law firms, said today it will apply to the Upper Tribunal for a review of the scheme under section 404D of the Financial Services and Markets Act 2000.
The legal challenge argues that the FCA has relied on the Supreme Court’s judgment in Johnson v FirstRand as a benchmark for deciding which cases are in scope of the schemes. This is despite the court explaining that the case had been decided on its own facts.
Consumer Voice said the calculation for offering redress is ‘fundamentally flawed and significantly underestimates the true harm suffered’.
Alex Neill, co-founder of Consumer Voice, said: ‘We are taking this unprecedented step to challenge the regulator’s redress scheme because it doesn’t deliver fair or lawful compensation for drivers. We support a redress scheme being put in place, but as it stands millions of people will be under-compensated, and the lenders involved in this scandal won’t be meaningfully held to account.
‘The FCA has designed a scheme that leaves ordinary motorists hundreds of pounds per claim out of pocket. That cannot be left unchallenged.’
The group is funded by providing communications and engagement services to law firms to help raise awareness of claims. In some cases, it also takes a fee from legal firms when someone from its community joins a claim.
The FCA says the schemes in their current form already put £7.5bn in total back in the pockets of consumers, some of who have already waited years for a resolution. It is understood that if one element of the redress schemes has to be revised, that would mean the whole process starts again.
An FCA spokesperson said: ‘Our scheme is the quickest, fairest way to compensate consumers. It seems contradictory that organisations claiming to represent consumers would seek to delay payouts for millions of people.’
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