A British consumer group has launched a legal challenge against a 9.1 billion-pound ($12.32 billion) redress scheme designed to compensate motorists for mis-sold motor finance. The move, initiated by Consumer Voice, has drawn a swift response from Britain’s Financial Conduct Authority (FCA), which described the action as disappointing. The consumer group’s application to London’s Upper Tribunal seeks to contest the regulator’s final bill, arguing it fails to adequately or lawfully compensate affected consumers.
The FCA had unveiled the trimmed-down, final compensation framework last month, following significant pushback from various lenders. This decision came in the wake of the United Kingdom’s top court overturning a landmark ruling that had previously sent widespread shockwaves throughout the nation’s motor finance sector. The original ruling’s reversal prompted the FCA to refine its approach, aiming to streamline the redress process.
While major lenders, including Close Brothers and Santander, have chosen not to challenge the FCA’s redress scheme, a decision the regulator noted would facilitate quicker compensation for consumers, Consumer Voice holds a contrasting view. The group stated its belief that the scheme “fails to deliver fair, adequate or lawful consumer redress and systematically undercompensates consumers.” It further claimed that “consumer redress has been minimised in order to protect lenders.”
The FCA has voiced concerns that Consumer Voice’s legal action could significantly delay the distribution of compensation to affected consumers. Furthermore, the regulator warned that the challenge “also prolongs the uncertainty for all involved, which is not good for investment or a healthy motor finance market.” The FCA confirmed it is currently “considering our approach and will set out more later this week,” as the legal proceedings are set to unfold.
