Consumer Voice has filed a legal challenge to alter the way compensation is calculated as part of the FCA’s car finance redress scheme, warning that in its current form it could leave millions of consumers out of pocket by hundreds of pounds per claim.

Consumer Voice has applied to the Upper Tribunal for a review of the scheme under section 404D of the Financial Services and Markets Act 2000. This is the first time an FCA redress scheme has been subject to such a challenge.

Millions of drivers have waited for years for justice over the car finance scandal, with the FCA first announcing a general review of the motor finance market in April 2017.

Consumer Voice supports the need for an industry-wide scheme but believes the scheme, as designed, fails to deliver fair, adequate or lawful consumer redress and systematically under-compensates consumers.

As part of the challenge, Consumer Voice has outlined how the FCA can commence the operation of the Scheme, apart from the rules which concern redress, whilst the Tribunal determines this challenge on an expedited basis.

Consumer Voice is not challenging which car finance agreements would be covered by the Scheme, meaning lenders involved in historic mis-selling can start the “back office” process of identifying impacted motorists.

On balance, Consumer Voice believes getting it wrong now would mean underpayment for millions of people to the tune of billions of pounds and raises real concerns that the wrongdoers involved in this scandal will never be properly held to account.

For many consumers, compensation will be calculated in a way that bears little resemblance to the financial strain they experienced.

The FCA has limited full refunds of commission to a small group of cases that closely match one court decision. We believe this is too restrictive, as many more consumers were affected by the same unfair practices.

The loss-based formula at the centre of the proposed Scheme uses standardised interest rate adjustments to estimate what borrowers lost. But this is based largely on data from the final years before the FCA banned discretionary commission agreements, a period when overcharging was already falling, after brokers and lenders had been put on notice. The data used in the analysis was provided by lenders voluntarily, with not all firms sharing data, which Consumer Voice argues may introduce further bias.

The FCA has acknowledged that harm varied over time, and our independent economic analysis of FCA data confirms the approach may underestimate the harm suffered by those who took out agreements during the worst years.

The FCA’s own estimates show that their proposed approach to interest alone could significantly reduce the total amount paid to consumers. Compared to a scenario where compensation included 8% interest, which courts can and have awarded, this could amount to billions less being returned to consumers.

Consumer Voice believes the FCA should give drivers the chance to access a redress scheme that fairly reflects the harm they suffered, with properly calculated compensatory interest.

Consumer Voice believes consumer redress has been minimised in order to protect lenders in a way which misunderstands and misapplies the FCA’s market integrity objective whilst wrongly minimising the consumer protection objectives of the FCA, which should drive consumer redress schemes.

Alex Neill, co-founder of consumer rights organisation Consumer Voice, said:

““We support a redress scheme being put in place but have launched this action on behalf of millions of consumers because we believe it doesn't deliver fair or lawful compensation for them.”

“The FCA’s own analysis shows consumers could be billions worse off, purely based on its approach to compensatory interest. This means that millions of people could be severely under-compensated at a time when many families are under financial pressure.”

“It’s no surprise the banks and car finance industry have not challenged the FCA’s scheme – which if implemented now could save them billions. The FCA must fix the scheme and deliver the fair redress that millions of UK motorists are owed.”

To find out more about the challenge visit the Consumer Voice website: [https://consumervoice.uk/cars/fca-car-finance-compensation-challenge]

Notes to editors

About Consumer Voice

Consumer Voice is free to use, independent and we tell consumers when the companies they buy from have broken the law. We help people easily work out whether they’re entitled to compensation and how to claim.

Alex Neill and Nikki Stopford co-founded Consumer Voice in 2023. They are consumer rights experts and have over 20 years’ experience of advocating and raising industry standards for consumers.

About the legal challenge

On 30 March 2026, the Financial Conduct Authority (FCA) published Policy Statement PS26/3, setting out the final rules for its industry-wide motor finance redress scheme. The scheme covers regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024 where commission was paid to a credit broker. It has been split into two separate schemes: Scheme 1, covering agreements from 2007 to 31 March 2014, and Scheme 2, covering agreements from 1 April 2014 to 1 November 2024. The FCA estimates 12.1 million agreements are eligible, with an average payout of around £830 per consumer, and a total redress pot of £7.5 billion.

Consumer Voice is being represented on a pro bono basis by Courmacs Legal, a specialist consumer law firm that represents 1.6 million motor finance claimants. The proposed challenge will be brought in the Upper Tribunal (Tax and Chancery Chamber) under section 404D of the Financial Services and Markets Act 2000.

About Consumer Voice’s car finance research

This challenge is backed by extensive consumer research conducted by Consumer Voice into the scale and impact of the car finance scandal. A 2025 survey of more than 2,000 consumers found widespread gaps in awareness at the point of sale, with only 22% saying they recall commission being explained clearly. Many said they would have made different choices had they known their interest rate was shaped by commission.

For many consumers, inflated car finance costs pushed them into financial strain. Nearly one in five (19%) struggled to pay everyday bills, 13% relied on additional credit, 10% had to borrow from friends or family. In other words, many people were forced to borrow at much higher rates than the base rate just to get by.

Trust in the compensation process is extremely low. Only 22% of consumers say they trust lenders to follow FCA rules when calculating compensation. And just 7% trust them to provide clear, impartial information about the process.

Consumer Voice conducted a survey of 2,021 members of the public who had taken out a car finance agreement between 2007 and 2024. The majority had taken out at least one agreement during 2007-2021, the key period under review. Fieldwork took place online between 27 October and 9 November 2025. The results formed the basis of its response to the FCA consultation on motor finance redress.

For more details go here: https://consumervoice.uk/cars/financial-regulator-must-put-consumers-first-in-car-finance-redress-scheme

Further in-depth research from Consumer Voice can be found here:

https://consumervoice.uk/cars/car-finance-scandal-those-hit-hardest-risk-losing-out-again (30 March 2026)

https://consumervoice.uk/cars/car-finance-whats-next-for-consumers-in-2026 (1 January 2026)

https://consumervoice.uk/cars/car-finance-the-incentives-dealers-dont-want-to-tell-you-about (28 March 2025)

https://consumervoice.uk/cars/car-finance-what-consumers-want (21 March 2025)

https://consumervoice.uk/cars/car-finance-dealer-trust-broken-as-compensation-nears (14 March 2025)

https://consumervoice.uk/cars/car-finance-customers-kept-in-the-dark-over-secret-commissions (20 January 2025)

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