FCA Accused of Threatening Consumer Group Over £9.1bn Car Loan Scheme

An estimated 12.1 million car finance agreements qualify for redress under the scheme, with an average payout projected at £829.

The FCA maintains its scheme offers the quickest, fairest, and most efficient method to return £7.5 billion to consumers; an FCA spokeswoman stated, "Our scheme is the quickest, fairest and most efficient way to put £7.5 billion back in consumers’ pockets and we are defending it robustly."

The FCA's proposed minimum interest rate for compensation stands at 3%, calculated from the annual average Bank of England base rate plus 1%.

However, the FCA faces accusations of threatening Consumer Voice (CV) with adverse consequences should the group block the compensation scheme.

Legal documents indicate Nikhil Rathi, the FCA's chief executive, warned the regulator would be 'unable to collaborate' with Consumer Voice if it pursued legal action, reportedly suggesting 'adverse consequences for CV’s future engagement with the FCA and adverse press briefings against it'.

The implication was clear: the FCA’s willingness to engage constructively with Consumer Voice hinged on the group not challenging the scheme, giving way to hostility if it did.

Up until that point, the FCA had treated Consumer Voice as a 'trusted expert consumer body'.

Once Consumer Voice decided to challenge the scheme, the FCA reportedly 'changed its position,' now seeking 'to denigrate CV’s activities and motives in bringing this application'.

Rathi also allegedly claimed Consumer Voice's potential legal challenge posed the 'biggest risk to the scheme,' stating that plans to deliver money to millions of victims by this Christmas would fail if directors proceeded with their plans.

It was not disclosed that three specialist lenders—Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance—are also challenging the scheme on different grounds.

Instead, communication only stated that the FCA had been 'engaging with the banks,' who had decided against challenging the payout plan over a previous weekend.

Consumer Voice claims the UK’s financial watchdog prioritised making its £9.1 billion motor finance compensation scheme cheaper for lenders over protecting drivers, asserting consumers will be "short-changed" by the scheme in its current form.

Legal filings allege the FCA decided on a compensatory interest rate that "knowingly set the floor below the actual borrowing costs of most consumers."

Peter Andrews, a critic of the scheme, stated, "The fact that one scheme may be cheaper than another does not seem to be an adequate basis for a decision to favour the cheaper scheme when the main objective of the scheme must be consumer protection."

The FCA has described its scheme as "fair to consumers and proportionate for firms."

Consumer Voice partners with law firms to assist consumers in 'get[ting] back money they’re owed from rule-breaking companies,' promoting claims against major entities like Amazon, Facebook, Mastercard, Apple iCloud, and Sony PlayStation.

The group earns commission when its members join one of these law firms’ cases, also generating revenue through communications work for law firms to raise awareness of their claims.

Courmacs Legal confirms it provides pro bono services in the case against the FCA.

Legal challenges have delayed payouts that were initially expected to commence this year.

An FCA spokeswoman noted, "It is unfortunate the challenges have delayed payouts for consumers that were due to begin this year, especially as household bills come under greater pressure."

The UK's Upper Tribunal will hear the legal challenges in December or February, with a judgment expected later.

The FCA spokeswoman affirmed, "We will respond fully to these challenges in court."