Regulator says firms should explain risks of delay and consider waiving fees for affected clients
The Financial Conduct Authority has urged law firms and claims management companies challenging its motor finance redress scheme to consider the interests of their clients, as a dispute over the framework intensifies.
In a statement, the regulator said firms involved in legal action should reflect on whether their approach risks delaying compensation for millions of customers, stressing that its scheme represents the “quickest, fairest way” to deliver redress at scale. It added that it had no vested interest in creating the scheme beyond ensuring consumers receive appropriate compensation.
The FCA said: “What matters to us is getting fair compensation for consumers as quickly as possible and supporting a healthy motor finance market for the future. That’s what our scheme will do, and it’s free for consumers to use.”
The FCA said consumers should not be “made to wait” longer for compensation, noting that some have already waited more than two years for responses to complaints. It also pointed out that many affected agreements did not involve the most serious forms of misconduct identified in recent case law.
The regulator added: “Any law firm or CMC involved in a potential challenge against the scheme that also has clients making motor finance claims should consider their position and that of their clients carefully. At the very least, they should write to those clients to explain they’re involved in a challenge that’s likely to delay compensation. They should give those clients the option of exiting the contract and strongly consider waiving any fees.”
However, the FCA’s intervention has prompted a sharp response from claimant lawyers involved in motor finance litigation.
Kevin Durkin, Head of Legal Practice at HD Law, accused the regulator of “hypocrisy” following its comments about delay.
Mr Durkin is the solicitor behind the Supreme Court case brought by Marcus Johnson against FirstRand Bank, which helped establish key legal principles in motor finance claims and paved the way for billions of pounds in potential compensation.
Responding to the FCA’s position, he said: “It sits ill in the mouth of the FCA to reference delay when it has been investigating this area for almost ten years before setting down a clear policy only last month. This in itself was accelerated by HD Law succeeding on behalf of Mr Johnson in the Supreme Court last August.”
Mr Durkin has consistently argued that the regulator has been systematically “lowballing” compensation to protect bank liquidity.
He said: “I welcome this challenge to the Financial Conduct Authority’s flawed motor finance compensation scheme. The concerns being raised reflect obvious issues with the scheme, which, in its current form, leaves many consumers undercompensated.
“Given the paucity and inadequacy of the scheme, HD Law is not surprised it is being challenged. It is right that these matters are now being tested.
“HD Law has played the leading role in advancing consumer rights in this area, including securing victories in the Supreme Court and Court of Appeal, which have helped establish important legal principles for consumers.
“The current scheme simply does not have the general public’s needs at the forefront. While a judicial review may result in a short-term delay, we hope it can deliver a fairer, more equitable outcome for consumers overall. Let’s hope that any potential delay results in more money in the public’s pockets. Short-term pain for long-term gain.
“If the challenge succeeds, it could ensure that affected individuals receive the compensation they deserve, reinforcing trust in the process. Let’s just hope that this is expedited swiftly.”