FCA urges firms fighting motor finance redress scheme to ‘consider their clients’

The Financial Conduct Authority has made a direct appeal to law firms and claims management companies to reconsider whether to pursue motor finance cases. In an unprecedented intervention, the regulator said lawyers should ‘consider the position of their clients’ before advising them not to go through its own redress scheme.

The FCA has regularly urged consumers to think twice about pursuing separate legal action which might result in deductions from their compensation for unfairly being charged commissions.

This first call to the firms themselves could be an indication of concern within the FCA that its scheme is not drawing a line in the sand on the motor finance scandal. It comes in the same week that campaign group Consumer Voice said it was considering a judicial review to challenge the scheme amid accusations that people risk being under-compensated.

The FCA said it had no vested interest in setting up the redress scheme and was concerned with getting fair compensation for consumers as quickly as possible and supporting a health motor finance market.

It added: ‘Any law firm or CMC involved in a potential challenge against the scheme that also has clients making motor finance claims should consider their position and that of their clients carefully. At the very least, they should write to those clients to explain they’re involved in a challenge that’s likely to delay compensation. They should give those clients the option of exiting the contract and strongly consider waiving any fees.’

The Consumer Voice challenge was made in conjunction with Blackburn-based claims practice Courmacs Legal. The firm said the widespread coverage was a ‘good day for awareness’ and explained it was important to counter the motor finance industry voices pushing in the the opposite direction.

The firm added: ‘Schemes of this size tend to reward the patient and the well-informed. Everyone else quietly falls through the cracks.’

The FCA’s direct appeal to lawyers to reconsider bringing claims is unlikely to stop firms who believe they can secure higher amounts than the £829 average scheme payout envisaged by the FCA.

Kevin Durkin, head of legal practice at Manchester firm HD Law which represented the successful claimant in Johnson v FirstRand through to the Supreme Court, said the current scheme does not prioritise consumers.

‘The concerns being raised reflect obvious issues with the scheme, which, in its current form, leaves many consumers undercompensated,’ said Durkin. ‘Given the paucity and inadequacy of the scheme, HD Law is not surprised it is being challenged. It is right that these matters are now being tested.’

Durkin accused the FCA of hypocrisy for suggesting that lawyers bringing any court challenge risk adding to the delays for securing redress. He added: ‘It sits ill in the mouth of the FCA to reference delay when it has been investigating this area for almost ten years before setting down a clear policy only last month.

‘While a judicial review may result in a short-term delay, we hope it can deliver a fairer, more equitable outcome for consumers overall. Let’s hope that any potential delay results in more money in the public’s pockets.’