In a recent report of the All-Party Parliamentary Group(APPG) on Fair Banking, MP’s have stated that the Financial Conduct Authority(FCA) proposed car finance redress scheme is “not fit for purpose” and that they have “nakedly taken the side of lenders” in its car finance redress proposals.
The APPG has also stated the FCA has been “patently influenced” by concerns over lenders’ profits and has bought into “doom-mongering”by lenders, many of which are facing a significant compensation bill. This includes the likes of Black Horse, Santander, Barclays and Close Brothers who claim that the regulator’s redress proposals and potential pay outs pose a risk to the wider economy, even leaving open the possibility of finance companies taking legal action against the FCA. Santander has recently called on the government to intervene on the basis that the regulator’s proposals were tilted too far in favour of consumers.
The APPG’s latest report also notes the FCA’s differing estimates of what victims of car finance mis-selling could be due. The regulators current estimate stands at around £8.2bn, which is a far cry from previous estimates of £15.6bn and the £44bn which they may have faced had August’s Supreme Court judgment been entirely in consumers’ favour.
Warnings over complexity of redress scheme
The APPG has also warned that lenders could well exploit the complexity of redress calculations and act as “judge and jury” in respect of complaints.
The APPG said in its report: “Rather than siding with consumers in deciding the levels of redress, the regulator appears to have nakedly taken the side of lenders, working to protect their profit margins rather than the pockets of consumers,”.
“Time and again in its consultation document the FCA warns how ‘higher [redress] costs to firms could dent profit margins’ or‘ higher costs to lenders in this scenario could have knock-on impacts on lender profit margins’. These warnings all follow the same basic pattern: a warning about profits, caveated with the risk to the market of lenders withdrawing their products and hitting consumer choice.”
How Much Car Finance Compensation Should I Receive?
In its redress proposals on 7 October 2025, the FCA said consumers will be due an average of £700 compensation per mis-sold agreement. The APPG notes that consumers could receive more than double that amount, citing a likely average payout of £1,500 net of legal fees for those who choose to take their case to court.
The report also notes that the proposed compensatory interest rate of 2.09% is significantly lower that the 6-8% commercial rates achievable elsewhere in the judicial system.
Given these very clear warnings and numbers, it’s no surprise that many consumers are choosing professional representation to obtain the compensation that they deserve and are wary of a redress scheme, which will essentially short change them (as it serves the interests of lenders rather than consumers), particularly where the FCA is advising consumers to trust their lender to calculate redress correctly, having been responsible for the mis-selling of finance to them in the first place.
Frank Wade, Financial Mis-selling Litigation Manager at Johnson Law Group said: “It speak volumes that MP’s have seen the unfairness to consumers and bias towards lenders within the FCA’s proposed redress scheme. If the FCA want to follow the law as they have already stated, then they must introduce a scheme which balances the interests of both the finance industry and consumers. Another key driver of the FCA is to have a scheme which minimises litigation. If that is to happen then the proposed scheme needs a serious re-think in some key areas such as the proposed rate of compensatory interest and the APR adjustment. Ultimately, we must hope that this consultation is not simply paying lip service to all concerned, especially the millions of consumers who have been wronged by the finance industry over a period of almost2 decades.”
Jamie Patton, Managing Director at Johnson Law Group added: “It’s absolutely right that the FCA should be called out on the proposed scheme. A scheme is not “free” if it comes at the cost of being forced to accept less than you’re entitled.
“If the FCA wants these cases to be kept out of court then the compensation payable needs to align with people’s legal rights.”
What Happens Next?
The FCA’s consultation on its redress proposals remains open until 5pm 12 December 2025. The regulator expects to finalise its proposals and final rules of any scheme introduced “by early 2026” with compensation payments to start shortly afterwards but it remains unclear to what extent any action from lenders may delay these plans.
In a recent report of the All-Party Parliamentary Group(APPG) on Fair Banking, MP’s have stated that the Financial Conduct Authority(FCA) proposed car finance redress scheme is “not fit for purpose” and that they have “nakedly taken the side of lenders” in its car finance redress proposals.
The APPG has also stated the FCA has been “patently influenced” by concerns over lenders’ profits and has bought into “doom-mongering” by lenders, many of which are facing a significant compensation bill. This includes the likes of Black Horse, Santander, Barclays and Close Brothers who claim that the regulator’s redress proposals and potential pay outs pose a risk to the wider economy, even leaving open the possibility of finance companies taking legal action against the FCA. Santander has recently called on the government to intervene on the basis that the regulator’s proposals were tilted too far in favour of consumers.
The APPG’s latest report also notes the FCA’s differing estimates of what victims of car finance mis-selling could be due. The regulators current estimate stands at around £8.2bn, which is a far cry from previous estimates of £15.6bn and the £44bn which they may have faced had August’s Supreme Court judgment been entirely in consumers’ favour.
Warnings over complexity of redress scheme
The APPG has also warned that lenders could well exploit the complexity of redress calculations and act as “judge and jury” in respect of complaints.
The APPG said in its report: “Rather than siding with consumers in deciding the levels of redress, the regulator appears to have nakedly taken the side of lenders, working to protect their profit margins rather than the pockets of consumers”.
“Time and again in its consultation document the FCA warns how ‘higher [redress] costs to firms could dent profit margins’ or ‘higher costs to lenders in this scenario could have knock-on impacts on lender profit margins’. These warnings all follow the same basic pattern: a warning about profits, caveated with the risk to the market of lenders withdrawing their products and hitting consumer choice.”
How Much Car Finance Compensation Should I Receive?
In its redress proposals on 7 October 2025, the FCA said consumers will be due an average of £700 compensation per mis-sold agreement. The APPG notes that consumers could receive more than double that amount, citing a likely average payout of £1,500 net of legal fees for those who choose to take their case to court.
The report also notes that the proposed compensatory interest rate of 2.09% is significantly lower that the 6-8% commercial rates achievable elsewhere in the judicial system.
Given these very clear warnings and numbers, it’s no surprise that many consumers are choosing professional representation to obtain the compensation that they deserve and are wary of a redress scheme, which will essentially short change them (as it serves the interests of lenders rather than consumers), particularly where the FCA is advising consumers to trust their lender to calculate redress correctly, having been responsible for the mis-selling of finance to them in the first place.
Frank Wade, Financial Mis-selling Litigation Manager at Johnson Law Group said: “It speak volumes that MP’s have seen the unfairness to consumers and bias towards lenders within the FCA’s proposed redress scheme. If the FCA want to follow the law as they have already stated, then they must introduce a scheme which balances the interests of both the finance industry and consumers. Another key driver of the FCA is to have a scheme which minimises litigation. If that is to happen then the proposed scheme needs a serious re-think in some key areas such as the proposed rate of compensatory interest and the APR adjustment. Ultimately, we must hope that this consultation is not simply paying lip service to all concerned, especially the millions of consumers who have been wronged by the finance industry over a period of almost 2 decades.”
Jamie Patton, Managing Director at Johnson Law Group added: “It’s absolutely right that the FCA should be called out on the proposed scheme. A scheme is not “free” if it comes at the cost of being forced to accept less than you’re entitled.
“If the FCA wants these cases to be kept out of court then the compensation payable needs to align with people’s legal rights.”
What Happens Next?
The FCA’s consultation on its redress proposals remains open until 5pm 12 December 2025. The regulator expects to finalise its proposals and final rules of any scheme introduced “by early 2026” with compensation payments to start shortly afterwards but it remains unclear to what extent any action from lenders may delay these plans.
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