FLA steps back from legal challenge, but consumer group may test the scheme in court
The motor finance industry’s main trade association has said its members will not contest the Financial Conduct Authority’s (FCA) motor finance redress scheme, easing one route for a court fight against the regulator’s plan to compensate motorists for alleged mis-selling linked to undisclosed commission arrangements between 2007 and 2024.
The FCA’s programme, announced at the end of March, is expected to cover about 12.1 million finance agreements. The regulator has estimated an average payment of roughly £830 and a total bill of £9.1 billion, including around £7.5 billion in compensation to customers.
The Finance & Leasing Association (FLA)’s chief executive said the trade body still had reservations, but would not seek to block the proposals.
“We have always been clear that customers who have suffered loss should receive compensation and that a consumer redress scheme is the right way to achieve this,” said Shanika Amarasekara (pictured right), chief executive of the Finance & Leasing Association. “The FLA has undertaken a detailed review of the FCA’s proposed scheme in close consultation with our members, alongside internal and external economists and legal counsel.
“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. We will continue to engage constructively with the FCA and other stakeholders to support the effective implementation of the scheme.”
However, the regulator may still face litigation. Consumer Voice, a group involved in consumer compensation claims, has said it intends to challenge the scheme, arguing that some borrowers could receive too little under the FCA’s methodology, including assumptions used to estimate losses.
Consumer Voice has said the scheme “as designed, fails to deliver fair, adequate or lawful consumer redress and systematically under-compensates consumers.”
Interested parties have until 5pm today to bring a challenge to the FCA scheme.
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