FLA will not challenge FCA redress scheme

The Finance & Leasing Association (FLA), in common with leading auto finance lenders, will not be challenging the Financial Conduct Authority’s (FCA’s) redress scheme, leaving campaigning group Consumer Voice as the only entity to have initiated legal action ahead of the 27 April deadline.

“As the leading industry trade body, it is our responsibility to consider how regulatory action will affect not only our members and their customers, but also the wider UK lending market, particularly when the scheme is unprecedented in scale and scope, and the impact on the UK economy will be significant.  

 “We continue to have concerns about aspects of the scheme, but our priority is that a practical solution be reached that ensures timely compensation for consumers while giving the motor finance industry and the wider market clarity and finality on this issue. For those reasons, we will not be challenging the FCA’s current scheme.”

Lenders

Lloyds Bank, which is a major auto finance lender via its Black Horse subsidiary, has been a critic of the FCA’s review and proposed scheme, with CEO Charlie Nunn suggesting that “having a scheme like this, that would take away more than 20 years of the profitability of [the car finance] sector” and impact the UK’s “investability”.

However, a spokesperson for the bank ruled out a legal challenge, telling the Financial Times: “While we remain disappointed in and disagree with [the FCA’s] conclusions, we believe that moving forward with the scheme is now the right step for our customers and shareholders in support of a clear, orderly and final process that provides certainty for consumers and industry.”

There have been similar responses from other lenders.  In a statement, Close Brothers said: “While there are elements of the scheme that we disagree with, after ​careful consideration we believe ​that the ⁠existing scheme offers a quick, clear and certain route to resolving this matter for all relevant parties.” ​

Separately, a Santander ​spokesperson said: “We ⁠have decided not to challenge the schemes and will now focus on their implementation. We will continue to work constructively with regulators ⁠and policymakers ​to seek to improve the competitiveness ​of the UK in the interests of all our customers, taxpayers and investors.”

In its Q1 2026 results, Barclays increased its provision in by £105m to reflect the expected financial impact of the redress schemes based on the FCA’s final rules and higher compensatory interest. However, the bank stated: “Barclays has decided not to challenge the FCA’s final rules in the interests of enabling a swift resolution for customers. However, Barclays strongly disagrees with aspects which require financial redress even where customers suffered no demonstrable financial harm.”

Consumer Voice

In contrast, not-for-profit campaigning group Consumer Voice has confirmed it is applying to the Upper Tribunal for a review of the FCA’s car finance compensation scheme.

“Millions of drivers were overcharged through hidden and unfair commission, yet the FCA’s scheme risks leaving many of them missing out on hundreds of pounds they’re owed. 

“People have already been let down once by lenders. They should not now be let down again by the regulator that is supposed to protect them. The FCA needs to fix the scheme to ensure it delivers fair and lawful compensation for drivers.”

The Consumer Voice claim, which has backing from claims management company (CMC) Courmacs Legal, argues that only a small number of consumers will receive full refunds of the commission paid plus interest. In effect these are the cases that match the Johnson case at the Supreme Court, with very high commission levels and a hidden exclusive relationship with a lender or a discretionary commission arrangement. 

It says the loss-based formula which will be applied to the majority of other cases will result in lower payments than consumers might expect if they took their case to court. This is because the scheme uses standardised interest rate adjustments to estimate what borrowers lost, which Consumer Voice claims is based largely on data from the final years before the ban on discretionary commission – a period when overcharging was already falling, after brokers and lenders had been put on notice. 

“We believe the FCA has designed the scheme with greater regard to the impact on lenders than to what is fair and reflective of what consumers actually lost. Its approach to compensatory interest alone could significantly reduce the total amount paid to consumers. Compared to a scenario where compensation included 8% interest – as courts can and do award – this could amount to billions less being returned to consumers,” Consumer Voice said.

Theoretical loss

“The harm here is somewhat theoretical – because it’s highly likely that even if the commissions had been disclosed, the vast majority of consumers would have taken the same course of action.

“It sets an odd precedent to say that all consumers should be compensated if they got a bad deal in the past – particularly in competitive markets where there was not necessarily any barrier to getting them shopping around.

“What differs between this mass redress event and previous ones is that consumers were not “mis-sold” as such. They wanted to buy a car and they were sold finance to support them. It was the right product at the wrong price. Although they paid too much, they still got use of their nice new car – and the headline price of the vehicle may have been discounted if they took up the in-house finance.”

Next steps

In response to news of the legal challenge, the FCA said: “Our scheme is the quickest, fairest and most efficient way to compensate consumers. It is disappointing that some have decided to challenge it and delay consumers getting their money back, when for many the payouts would be very welcome this year as they face rising household bills. This also prolongs the uncertainty for all involved, which is not good for investment or a healthy motor finance market.

“We are considering our approach and will set out more later this week.”

The timeline for the Upper Tribunal’s consideration of the Consumer Voice challenge is unclear at present.