Key facts
- The Treasury is accused of seeking to cap payouts in the motor finance scandal to levels manageable for lenders.
- The FCA is accused of unlawfully failing to protect consumers in the motor finance redress scheme.
- Consumer Voice and Courmacs Legal are challenging the £9.1bn compensation scheme.
- The Supreme Court found one customer's undisclosed commission created an 'unfair relationship'.
- Several financial services firms and banks are facing billions in payouts.
- The FCA has suspended parts of the redress program.
The UK Treasury is facing accusations that it sought to limit payouts in the motor finance scandal to a level that lenders could absorb, with a consumer advocacy group claiming the Financial Conduct Authority (FCA) acted unlawfully by not adequately protecting consumers. Consumer Voice, in conjunction with law firm Courmacs Legal, is seeking to overhaul the £9.1bn compensation scheme, alleging that internal documents show the Treasury influenced the FCA's decisions.
New court filings reveal that Consumer Voice contends the FCA received 'HMT steer' to ensure redress payments were manageable for lenders. This comes after former Chancellor Rachel Reeves' attempt to intervene in a Supreme Court case due to perceived negative economic consequences, an intervention the court rejected. The Supreme Court had previously ruled that while hidden commissions were not automatically unlawful, one customer's undisclosed commission created an 'unfair relationship', potentially opening the door for an industry-wide redress scheme.
Several financial institutions, including Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance, are challenging the FCA's scheme, arguing it unfairly assumes all customers suffered a loss if commissions were undisclosed. Major banks like Lloyds Banking Group and Santander have set aside billions for potential payouts but are not directly challenging the scheme. The FCA has suspended parts of the program, which anticipates an average payout of £830 per motorist, as it faces multiple challenges, with the Upper Tribunal set to hear four cases, including Consumer Voice's, by February 2027.