It’s something that’s dragged on for years, but there could well be a twist in the tale yet. Here’s the word;
Consumer Voice is bringing a novel 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 several hundred pounds per claim.
Consumer Voice is set to apply to the Upper Tribunal for a review of the scheme under section 404D of the Financial Services and Markets Act 2000. This will be the first time an FCA redress scheme has been subject to such a challenge.
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.
The FCA has chosen to apply the Supreme Court’s judgment in Johnson v FirstRand as a benchmark for cases which receive full commission redress, but in doing so has excluded the vast majority of consumer complaints from receiving such redress. This is despite the fact the Supreme Court itself explained the Johnson case as having been decided on its own facts. Instead, most consumers will receive redress based on a complex ‘hybrid’ redress calculation that is fundamentally flawed and significantly underestimates the true harm suffered.
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.
As part of the challenge the group is recommending that the operation of the Scheme can be commenced, apart from the rules which concern redress, whilst the Tribunal determines this challenge on an expedited basis.
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 wrong doers will never be properly held to account.
Alex Neill, co-founder of consumer rights organisation Consumer Voice, said:
“We are taking this unprecedented step to challenge the regulator’s redress scheme because it doesn’t deliver fair or lawful compensation for drivers. We support a redress scheme being put in place, but as it stands millions of people will be under-compensated, and the lenders involved in this scandal won’t be meaningfully held to account.
“The FCA has designed a scheme that leaves ordinary motorists hundreds of pounds per claim out of pocket. That cannot be left unchallenged.”
“The FCA has treated the Supreme Court’s judgment in Johnson as a rigid benchmark in order to exclude most consumers from receiving full commission redress, even though the Court itself acknowledged it was a fact sensitive decision. Its methodology relies on APR benchmarks that underestimate the real harm people suffered, and its interest calculations fall hardest on those who could least afford to be overcharged in the first place.”
“Consumers have been let down by the lenders who mis-sold them car finance. They should not be let down again by the regulator that is meant to protect them. 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.
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