Millions of motorists are facing potential delays in receiving compensation for their car finance deals due to a legal challenge. Consumer Voice, a consumer group, is seeking a review of the Financial Conduct Authority’s compensation scheme, arguing that it may not adequately compensate affected consumers. The scheme is expected to result in approximately £7.5 billion in payouts, lower than the initial estimate of £8.2 billion, with total costs projected to reach £9.1 billion.
Consumer Voice plans to file paperwork with the upper tribunal to challenge the current redress scheme, emphasizing the need for fair compensation that reflects the harm suffered by drivers. The group contends that the scheme, based on the Supreme Court’s judgment in Johnson v FirstRand, may leave many consumers undercompensated. Alex Neill, co-founder of Consumer Voice, criticizes the scheme for potentially leaving millions of drivers financially disadvantaged and calls for a fair resolution.
While the FCA defends its compensation scheme as the quickest and fairest way to compensate consumers, critics like James Daley from Fairer Finance argue that challenging the scheme could prolong the process and hinder timely payouts. The compensation scheme covers car finance agreements made between April 6, 2007, and November 1, 2024, involving commissions paid to brokers by lenders. Drivers who were not properly informed about high commissions, discretionary arrangements, or contractual ties may have been mis-sold car finance.
The FCA had initially estimated an average compensation of £700 per agreement but may vary based on individual circumstances. Recent adjustments to the scheme’s eligibility criteria mean fewer drivers may qualify, but those who do could receive higher payouts.