Millions of drivers may experience delays in receiving compensation for car finance following a legal challenge, Consumer Voice warns. The compensation payouts are expected to cover approximately 12.1 million unfair motor finance deals, averaging £829 per deal. Consumer Voice is seeking a legal review of the Financial Conduct Authority’s compensation scheme, raising concerns that it may not adequately compensate affected consumers.
The compensation scheme is estimated to result in firms paying out around £7.5 billion, slightly lower than the initial £8.2 billion projection. With administrative costs included, the total expenses are forecasted to reach £9.1 billion. Consumer Voice is planning to file paperwork with the upper tribunal to challenge the current scheme, arguing for a more comprehensive and fair compensation structure that accurately reflects the harm suffered by drivers.
Consumer Voice criticizes the FCA for basing its redress scheme on the Supreme Court’s ruling in Johnson v FirstRand, claiming that this approach excludes a significant number of consumer complaints from receiving proper compensation. The group emphasizes the need for fair and lawful compensation for affected drivers and urges the FCA to rectify the scheme to ensure that all individuals receive the compensation they deserve.
Despite opposition from certain consumer groups and the FCA, Consumer Voice maintains its stance that the current scheme fails to adequately compensate consumers who were victims of mis-sold car finance agreements. The group emphasizes the importance of holding lenders accountable and urges the FCA to revise the scheme to ensure fair redress for millions of affected motorists.
The compensation scheme applies to car finance agreements taken out between April 6, 2007, and November 1, 2024, involving commission payments from the lender to the broker. Drivers may have been mis-sold if their agreements included discretionary commission arrangements, high commission rates, or undisclosed contractual ties. While the FCA previously estimated an average refund of £700 per agreement, the actual amount may vary depending on individual circumstances.
In an effort to streamline the compensation process, the FCA has tightened eligibility criteria for redress, excluding loans with low commissions or zero interest rates. This adjustment means that fewer drivers will qualify for compensation, but those who do will receive higher payouts.
