Millions of motorists waiting for payouts from the £800 car finance scandal are facing further delays, as a consumer group launches a legal challenge against the compensation scheme.
Legal Challenge to FCA Redress Scheme
Consumer Voice is bringing a legal challenge to alter the way compensation is calculated. It has warned the Financial Conduct Authority (FCA) that in its current form, the scheme could leave millions of consumers out of pocket by several hundred pounds per claim.
Consumer Voice is set to apply to the Upper Tribunal for a review of the scheme under section 404D of the Financial Services and Markets Act 2000. This will be the first time an FCA redress scheme has been subject to such a challenge.
Concerns Over Compensation Calculations
Consumer Voice believes the FCA should give drivers the chance to access a redress scheme that fairly reflects the harm they suffered, with properly calculated compensatory interest. The group argues that consumer redress has been minimised in order to protect lenders, misunderstanding the FCA's market integrity objective while minimising consumer protection objectives.
Consumer Voice warns that getting it wrong now would mean underpayment for millions of people to the tune of billions of pounds, and raises concerns that wrongdoers will never be properly held to account.
Statement from Consumer Voice
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."
Neill added: "The FCA has designed a scheme that leaves ordinary motorists hundreds of pounds per claim out of pocket. That cannot be left unchallenged. The FCA has treated the Supreme Court's judgment in Johnson as a rigid benchmark to exclude most consumers from full commission redress, even though the Court acknowledged it was a fact-sensitive decision. Its methodology relies on APR benchmarks that underestimate the real harm people suffered, and its interest calculations fall hardest on those who could least afford to be overcharged."
He concluded: "Consumers have been let down by the lenders who mis-sold them car finance. They should not be let down again by the regulator that is meant to protect them. The FCA must fix the scheme and deliver the fair redress that millions of UK motorists are owed."
