Car finance mis-selling: FCA defends redress scheme as fair and proportionate amid claims drivers could miss out
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The FCA has defended its car finance redress scheme as the quickest and fairest way to compensate consumers, rejecting claims it could leave drivers underpaid.
The Financial Conduct Authority (FCA) has defended its industry-wide redress scheme for drivers mis-sold car finance, saying its aim is “to ensure consumers receive fair compensation as quickly as possible while maintaining a stable motor finance market”.
The statement comes after Consumer Voice, an independent consumer rights organisation, challenged the scheme, arguing it could leave some motorists hundreds of pounds out of pocket.
Drivers who took out car finance between 2007 and 2024 may be eligible for compensation after it was found that some lenders failed to disclose commission payments to dealers, leading customers to pay more than necessary. The FCA has launched the redress scheme to compensate those affected, but Consumer Voice says the measures do not go far enough.
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What is the car finance compensation scheme?
We have a full rundown of the FCA redress scheme which you can check out to get the whole story, but here’s a brief summary.
The FCA has found that some drivers who bought a car on finance between 2007 and 2024 may have had hidden commissions added to their deals which pushed up the amount of interest they paid.
There are around 12.1 million agreements being looked into under the new redress scheme, and the maximum payout to customers is set at £829.
Why is the redress scheme being challenged?
Consumer Voice is an independent company which specialises in helping consumers who have been treated unfairly by companies, and it believes the rules of the FCA’s redress scheme don’t fully reflect the losses suffered by drivers.
Alongside the 12.1 million agreements covered by the scheme, there are 4.7 million mis-sold agreements which are not included. Consumer Voice also says that the way compensation is calculated may fall short of what people are actually owed.
It says the formula uses benchmark interest rate adjustments and standardised assumptions about the amount buyers lost, which could “underestimate the scale of the overcharging”.
Alex Neill, co-founder of Consumer Voice, said:
“We support a redress scheme, but this one does not go far enough. Millions of drivers were overcharged through hidden and unfair commission, yet the FCA’s scheme risks leaving many of them missing out on hundreds of pounds they’re owed.”
What has the FCA said in response to the challenges?
The FCA said it had welcomed the “broad support for the scheme” and the commitment from most lenders to implement it. However, it also acknowledged that introducing a scheme on this scale had required it to make judgements to “simplify in a reasonable and lawful way some complex legal and operational issues”.
“We recognise that for some lenders this has been a difficult decision,” it said. “We appreciate that they have ultimately decided to put a resolution for their customers first, many of whom have been waiting for more than two years for an answer. They have also chosen to provide certainty for investors and to help rebuild trust in the market.”
The financial regulator said it had received four legal challenges: one from Consumer Voice, and three from lenders – Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance.
In its statement, the FCA said: “We respect the right of any party that the Courts decide has standing to challenge the scheme. We also note that none of the claims received are expressly in the name of individual consumers.”
It added: “We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long-running and complex issue.”
What does this mean for you?
Consumer Voice is applying to the Upper Tribunal for a review of the FCA redress scheme, with the intention of challenging the way it has been designed. The aim is to still get the redress scheme up and running while the tribunal looks into the rules, so this review shouldn’t delay your compensation.
With the redress scheme still going ahead, don’t delay checking your eligibility if you think you’ve been mis-sold. You can apply for free through the FCA’s website, so don’t fall for any third-party company trying to charge you to claim compensation.
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