The majority of drivers plan to use lawyers under the FCA car finance compensation scheme

New research shows most consumers want legal help with the FCA car finance redress scheme

Most consumers expect to use a lawyer to navigate the proposed car finance redress scheme and are prepared to go to court if compensation is inadequate, according to new research published by consumer rights organisation Consumer Voice.

The findings were submitted as part of Consumer Voice’s response to a consultation by the Financial Conduct Authority on its proposed redress scheme for mis-sold motor finance agreements.

The survey questioned 2,021 members of the public who had taken out car finance agreements between 2007 and 2024. It found that 80 percent would choose to use the FCA scheme if eligible, while 61 percent said they would do so with support from a law firm. Only 21 percent said they would prefer to proceed without legal assistance.

Just 13 percent said they would opt to go straight to court rather than use the scheme. However, attitudes shifted sharply if the level of compensation was perceived as inadequate. Almost all respondents said they would be willing to pursue court action if it resulted in higher compensation than the scheme offered.

When asked what level of uplift would make litigation worthwhile after legal fees, nearly half said they would need at least £2,000 more than the scheme would provide, while 20 percent said any increase above the scheme would justify court proceedings.

Awareness of the issue was high. Nearly 80 percent of respondents knew they might be owed compensation for mis-sold motor finance agreements, and 65 percent were aware that the FCA had proposed a redress scheme. Eighty two percent said they would be likely to make a claim if eligible.

Despite this, only 18 percent had already complained to their lender. Just 7 percent believed lenders would provide clear and impartial information about the compensation process.

The FCA was viewed as a reliable and impartial source of information by 56 percent of respondents. The same proportion trusted the Financial Ombudsman Service and an independent solicitor or legal adviser who was not affiliated with the lender.

Alex Neill, co-founder of Consumer Voice, said consumers were open to using the regulator’s scheme but would not accept reduced compensation. He said the FCA needed to ensure the scheme genuinely reflected the harm suffered or risk pushing large numbers of claimants towards litigation.

Consumer Voice also called for the scheme to adopt an opt-out approach for consumers who had not yet complained to their lender. Fifty seven percent of those surveyed supported opt out, rising to 71 percent among respondents who had entered into several car finance agreements.

The organisation warned that the FCA’s estimate of around £700 compensation per agreement understated the true level of harm. It argued that the proposed threshold for high commission was too high and that the interest rate applied to redress should better reflect consumer borrowing costs.