The Financial Conduct Authority’s (FCA) £9.1 billion compensation scheme for drivers mis-sold motor finance agreements is facing a legal challenge that could delay payouts expected to begin this summer. Consumer Voice, a consumer advocacy group, has notified the FCA of its intention to challenge the redress programme, arguing it inadequately compensates victims of the car loan scandal.
The scheme, designed to address widespread mis-selling of car finance agreements between 2007 and 2024, was established following an FCA ban on discretionary commission arrangements (DCAs) in 2021. These arrangements, where car dealers received hidden commission from lenders based on interest rates charged to customers, were found to incentivise higher borrowing costs for consumers.
Consumer Voice contends that the FCA’s current proposal, which averages £830 per mis-sold loan, prioritises limiting lenders’ financial exposure over delivering fair redress to drivers. The group, working with claims firm Courmacs Legal, plans to bring the challenge before the Upper Tribunal, where a judge will review the scheme’s merits.
An FCA spokesperson defended the programme, stating: “Our scheme is the quickest, fairest way to compensate consumers. It seems contradictory that organisations claiming to represent consumers would seek to delay payouts for millions of people.” Still, Consumer Voice co-founder Alex Neill countered that millions of drivers were overcharged through unfair commission practices and risk being left short-changed by the regulator’s approach.
The legal action comes amid separate concerns raised by law firm Slater & Gordon, which has accused major car finance lenders of employing delay tactics that could undermine the compensation process. These tactics include refusing to engage via email, rejecting Letters of Authority, demanding unnecessary identification checks and claiming key records have been deleted.
Slater & Gordon’s Chief Operating Officer, Lizzy Comley, warned that lenders responsible for the mis-selling scandal are now being entrusted to administer compensation, creating a conflict of interest. The firm’s dossier, shared with Members of Parliament, details evidence of lenders frustrating efforts to deliver timely and fair redress to affected consumers.
Consumer Voice’s Alex Neill supported these concerns, stating drivers who were misled deserve compensation delivered quickly and transparently. She emphasised that the focus must remain on ensuring the redress scheme delivers consistent outcomes for all affected individuals, many of whom purchased vehicles using finance agreements that now represent the vast majority of new and many second-hand car sales.
The FCA has not confirmed whether it has received notifications of additional legal challenges beyond the Consumer Voice action. As the situation develops, the regulator maintains that its scheme represents the most efficient path to compensation, while critics argue it requires revision to adequately address the scale of harm caused by undisclosed commission practices in the motor finance sector.
The outcome of the legal challenge will determine whether payouts to millions of drivers proceed as anticipated this summer or face further delays. For those seeking to check eligibility or stay updated on developments, official information is available through the FCA’s website and consumer advice services.