FCA accused of prioritizing lenders in £9.1bn car finance redress scheme

The Financial Conduct Authority (FCA) is facing legal challenges regarding its £9.1 billion motor finance compensation scheme, intended to redress mis-sold car loans between 2007 and 2024.

Consumer rights group Consumer Voice has accused the regulator of prioritizing the financial interests of lenders over those of drivers. Court filings claim the FCA set a compensatory interest rate of 3%—based on the Bank of England base rate plus 1%—to limit the total cost to firms and ensure operational simplicity. The group argues this rate is below actual borrowing costs for many consumers and that an 8% rate would have more accurately addressed consumer concerns.

Additionally, FCA Chief Executive Nikhil Rathi has been accused of threatening Consumer Voice with ‘adverse consequences’ and a loss of future collaboration if the group proceeded with legal challenges against the redress scheme. Legal documents suggest Rathi warned that the group's potential challenge posed the ‘biggest risk to the scheme’ and could prevent millions of victims from receiving payments by Christmas.