In its Consultation Paper CP25/27, the FCA proposes a Motor Finance Consumer Redress Scheme. The deadline for responses is 12 December 2025. In this article, Stephen Neville of Gough Square Chambers suggests reasons why the scope of the proposed scheme should be significantly curtailed.
SUMMARY
- The FCA proposes a Motor Finance Consumer Redress Scheme in its Consultation Paper CP25/27 (“the Consultation”). The deadline for responses is 12 December 2025.
- It is unrealistic to hope that the FCA will abandon the redress scheme entirely, but in this article I set out reasons for the proposal to be curtailed. I suggest that redress should be restricted to transactions in which either:
(i) undisclosed commission exceeds the “tipping point” of 50% of the Total Charge for Credit (“TCC”). This was the approach taken by the FCA in its PPI redress scheme applying the Supreme Court (“SC”) decision in Plevin v Paragon Personal Finance Ltd [2017] UKSC 23 (“Plevin”), or
(ii) the dealer breaches an express promise, made in the documents provided to the customer, to obtain, from a panel of different lenders, the terms most favourable for the customer. This applies one of the factors relied upon by the SC in the case of Hopcraft v Close Brothers Ltd [2025] UKSC 33 (“Hopcraft”).
Claims against a lender, which is a subsidiary of the vehicle’s manufacturer, arising from the sale, by the manufacturer’s franchised dealer, should be excluded from head (i).
- I contend in this article that the scheme as outlined is misconceived, and the justifications it provides are ill-founded. The proposal:
(i) did not represent the view held by the FCA for the past decade, and is inconsistent with its conduct throughout that period;
(ii) consciously rejects the actual legal position as set out in the Supreme Court (“SC”) . It even runs contrary to the submissions made by the FCA’s own counsel to the court when intervening in that case. An undisclosed Discretionary Commission Agreement (“DCA”), or Contractual Tie, may give rise to a legal remedy, but it depends on the context. There is no basis for automatically triggering redress when they are present;
(iii) relies on a summary of the decisions in R (on the application of Clydesdale Financial Services Ltd) v Financial Ombudsman Service Ltd [2024] EWHC 3237 (Admin) (“Clydesdale”) and Hopcraft, which omits pivotal facts, and is as a result misleading. It will result in widespread redress in circumstances where the courts would refuse a remedy;
(iv) prevents lenders from relying on evidence that any given customer has not suffered loss, on an arbitrary basis unheard of in any court;
(v) fails to take into account the government’s intention to reform the Financial Ombudsman Service (“FOS”), as announced by the Treasury in its Review published in July 2025;
(vi) disregards key findings of its own market research (set out in its Cost Benefit Analysis in Annex 2 to the Consultation), and as a result runs contrary to the supposed aim of the FCA to foster growth. Imposing a multi-billion pound burden on lenders will lead to increases to the cost of credit for businesses and individuals over the coming years, hindering our economic recovery.
- Under the Financial Services and Markets Act 2000 (“FSMA”) s404, it is a precondition of a redress scheme that, as a result of failure by firms to comply with requirements, it appears that consumers have suffered (or may suffer) “loss or damage in respect of which, if they brought legal proceedings, a remedy or relief would be available in the proceedings. The FCA proposes to cast the net far wider than the remedy available in court proceedings.
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