Editor’s note: This story updates our article published on Sunday 03 August – FCA likely to consult on finance redress scheme.
THE Financial Conduct Authority has confirmed it is consulting on a redress scheme for consumers subject to discretionary commission arrangements with qualifying consumers likely to receive less than £950.
Opening in October, the consultation will last six weeks and should mean claimants receive a payout in early 2026.
A statement by the FCA said it would consult on an industry-wide scheme, but has not said if it will be opt-in or opt-out for car buyers.
FCA Chief Executive, Nikhil Rathi (pictured above), said:
“It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.
“Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.
“It will take time to establish a scheme but we hope to start getting people any money they are owed next year.”
According to lawyer Jonathan Butler from law firm Geldards, who is retained by the Vehicle Remarketing Association, any claims now would have to meet the same level as that of Mr Johnson – the Supreme Court case winner.
“The claims that are out there still are for people that can show that there was a discretionary element to the agreements that they entered into and that can align themselves really with the circumstances in which Mr Johnson found himself,” he said.
In Mr Johnson’s case, he was subject to a DCA, the commission was excessively high at 55% of the total finance cost and he was an “unsophisticated” consumer, a legal term used to describe someone who is more vulnerable to mis-selling and needs greater protection.
Speaking on BBC Breakfast, Rathi indicated that a figure of 50% commission level as a percentage of the total cost of finance would be classed as similar to that of Mr Johnson.
Rathi added that for a consultation to run and a scheme introduced would mean payouts for qualifying individuals were not likely until 2026.
AFP says we’ve gone from clarity to confusion with FCA decision
Paul Hollick (left), Chair at the Association of Fleet Professionals, criticises the FCA action on financial redress for introducing uncertainty back to the fleet and leasing sector:
“We’ve gone from a situation on Friday where the Supreme Court verdicts suggested the worst risks for the motor finance sector had been removed, to one on Monday morning where the FCA’s intervention has reintroduced the possibility of quite widespread reparations. It means we’re going to remain in a situation of considerable uncertainty until the redress scheme is finalised, with that six-week process starting in October.
“The risks for the fleet industry here are twofold:
- If banks and motor finance companies are forced to pay billions in compensation to consumers, it’ll potentially have a knock-on effect on the availability and cost of finance to fleets.
- Also, if it becomes more difficult for used car buyers to access finance, it means there could be an impact on residual values, which is also bad news for fleets.
“We’d like to see the whole situation resolved as soon as possible. Yes, consumers whose legal rights have been ignored should be recompensed fairly but the motor finance market also needs to return to normal functioning as soon as possible.”
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Tristan Young is an award winning journalist with more than 25 years’ experience reporting on the automotive industry focussing predominantly on fleet and retail. As a self-confessed petrol-head, Tristan has a weakness for car classifieds. When he’s not writing about the automotive industry, he can usually be found outdoors with a small pack of border collies.
