Millions of consumers awaiting compensation payouts of around £800 each in a car finance scandal now face significant delays due to a legal challenge against the Financial Conduct Authority’s (FCA) current compensation scheme. Consumer Voice, a consumer rights organization, is contesting the way the FCA calculates these payouts, arguing that millions are at risk of being underpaid by hundreds of pounds per claim.
Consumer Voice has initiated a review application to the Upper Tribunal under section 404D of the Financial Services and Markets Act 2000. This marks the first time an FCA redress scheme has been legally challenged on these grounds.
The organization asserts that the FCA’s scheme fails to fairly reflect the harm suffered by drivers, as it excludes proper compensatory interest and minimises consumer redress to protect lenders. Consumer Voice criticizes the FCA for prioritizing market integrity objectives at the expense of consumer protection goals, resulting in reduced payouts to victims.
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Alex Neill, co-founder of Consumer Voice, stated: “We are taking this unprecedented legal step because the FCA’s redress scheme does not provide fair or lawful compensation. While we support implementing a compensation program, the current approach will leave millions under-compensated and shield lenders from meaningful accountability.”
Neill further criticized the FCA’s reliance on the Supreme Court’s Johnson judgment, which the FCA uses as a rigid benchmark to exclude many consumers from full commission redress. The judgment itself was acknowledged as a fact-sensitive decision, yet the FCA’s scheme underestimates real consumer harm by using APR benchmarks and interest calculations that disproportionately impact those least able to bear the financial burden.
“This is a betrayal of consumers who were mis-sold car finance agreements and expectations that the regulator would protect their rights,” Neill added. “The FCA must revise its compensation scheme to deliver the fair redress millions of UK motorists deserve.”