Consumer Voice Challenges Adequacy Of FCA Motor Finance Redress Scheme In Upper Tribunal

Key Takeaways

• Consumer advocacy group Consumer Voice has filed a Reply in Upper Tribunal proceedings arguing the FCA's motor finance Consumer Redress Scheme (CRS) will undercompensate millions of consumers by billions of pounds, while three lenders (CA Auto Finance, Mercedes-Benz Financial Services, and Volkswagen Financial Services) simultaneously challenge the scheme seeking to limit their liability further.
• The outcome of these combined Tribunal challenges will determine final redress methodology, timing, and quantum for an estimated 12.1 million eligible motor finance agreements, creating material uncertainty for firms' redress provisioning and operational planning.

Deep Dive

This filing relates to ongoing Upper Tribunal litigation (Tax and Chancery Chamber, Case Nos. UT-2026-000045 to 000048) challenging the FCA's Policy Statement PS26/3, which established the industry-wide Consumer Redress Scheme for historic motor finance commission mis-selling (including undisclosed discretionary commission arrangements). Critically, this is a two-sided challenge: Consumer Voice argues the FCA's redress methodology is unlawfully low (citing a £1,100 average consumer harm figure from 2019 FCA findings versus only £830 average redress under the Scheme), while three major lenders argue for even greater flexibility to reduce payouts. Compliance teams at firms with motor finance exposure should treat the final redress quantum and methodology as unsettled pending Tribunal determination.

Key substantive issues raised include: (1) the FCA's treatment of the Johnson case as a "high water mark" rather than extending the Commission Redress Remedy (CRR) more broadly; (2) use of an "arbitrary" midpoint between CRR and an APR Adjustment Remedy; (3) compensatory interest set at BoE base rate +1%, which CV alleges the FCA knew would undercompensate given actual consumer borrowing costs, compounded by removal of a previously-planned rebuttal mechanism; and (4) alleged FCA reliance on market integrity/market impact considerations without adequate evidential basis. CV also raises serious governance concerns regarding FCA conduct, including compressed consultation timelines, alleged pressure on CV (including direct intervention by CEO Nikhil Rathi) to abandon its challenge, and communications campaigns potentially discouraging consumers from seeking independent legal advice or using the Financial Ombudsman Service.

From a timeline perspective, PS26/3 was published in March 2026, with CV filing its original Statement of Facts and Grounds by April 27, 2026 (a compressed 28-day window) and this Reply following the FCA's Grounds of Response dated July 6, 2026. CV states it is "ready to proceed to a substantive hearing in 2026," indicating a resolution could come within the year, though the FCA's conduct in the litigation (described as taking 10 weeks to respond and 2½ months to serve its response) suggests potential for further delay.

Recommended actions for compliance professionals: (1) monitor Tribunal proceedings closely as the outcome will directly affect redress scheme design, lender liability, and provisioning requirements; (2) review current motor finance redress provisions against the range of possible outcomes (from the lenders' more favorable positions to CV's higher redress demands); (3) assess operational readiness to implement either an increased or more flexible redress methodology depending on the Tribunal's ruling; (4) evaluate communications and legal-advice-related conduct risk, given the scrutiny on the FCA's own consumer communications strategy, as similar scrutiny could extend to firms' own customer communications about the Scheme; and (5) maintain documentation of redress calculations and rationale given the heightened focus on regulatory decision-making quality and the duties of inquiry/conscientious consideration being tested in this case.

Source: Financial Conduct Authority