Millions of motorists will find out later today how and when they can access a compensation scheme for motor finance redress.
Law firms that have invested heavily in running motor finance claims will also be anxiously awaiting the details of the scheme, which the Financial Conduct Authority is expected to release late this afternoon.
The FCA has made no secret of its wish that motorists eligible for compensation should use the scheme and not access the services of a law firm or claims management company. However some firms have increased their marketing campaign in recent weeks saying they still believe this can be a profitable source of income.
The average compensation payment is likely to be £700 – much lower than previously expected – and lawyers will argue that only they can prioritise claimants’ interests rather than those of lenders. They will also question whether regulators who failed to stop unfair commission arrangements between lenders and dealers are best placed to protect consumers’ interests now.
Campaign group Consumer Voice said its own polling show that one in 10 ‘vulnerable’ consumers – those on lower incomes who say their car finance caused financial harm – are less likely to navigate the compensation process alone. Nearly seven in 10 (68%) cannot remember their lender, more than half do not have their paperwork, and only a third say they would find it easy to work out whether they qualify.
Trust is also extremely low, with just 7% saying they completely trust lenders to follow the rules when calculating compensation.
Alex Neill, co-founder of Consumer Voice, said: ‘Drivers have waited long enough for justice and won’t accept a redress scheme that papers over the cracks. People were charged more than they should have been, and many were pushed into real financial difficulty.
‘The FCA must deliver a scheme that fairly compensates consumers – not one that leaves them out of pocket again.’
The FCA has pledged that most people eligible for compensation will receive it this year, but it will also be under pressure from lenders and the government to ensure that the scheme does not place undue pressure on markets.
Nicola Pangbourne, a partner with international firm Kennedys, said the impact on financial institutions should not be underestimated and that the scheme will be time-consuming and costly to implement.
She added: ‘Whilst media headlines remain focussed around the redress sums, financial institutions may find that that costs associated with the entire process are far higher than anticipated. The public should not imagine that a redress scheme of this scope is cost-free, to either lenders themselves, or the wider economy.’
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