Guest post by Kavon Hussain, principal of Manchester law firm Consumer Rights Solicitors
Hussain:
The Financial Conduct Authority’s (FCA) motor finance redress scheme announced last week amounts to one of the largest ever consumer failures by the regulator.
For decades, the largest financial organisations in the UK picked the pockets of ordinary Brits who simply wanted to finance their purchase of a car.
This was done largely through clauses hidden in small print, or sometimes not printed at all, that allowed the car dealers to receive a secret kickback from lenders based on the interest rate charged to customers.
Even more cynically, this interest rate was set at the discretion of the broker or car dealer, not the banks, incentivising them to drive up the price for consumers because then both they and the lenders would see an increased profit.
This is unthinkable in any circumstance – imagine the outcry if mortgage brokers had been engaging in the same practice, adding a few percentage points to mortgages so they could pocket an even larger commission.
Cars are often the second-largest purchases people make after a house, yet this practice was systemic, with millions of people becoming victims.
When this practice was finally brought to light – largely due to the work of individuals and consumer law firms like my own – it became apparent that it was going to lead to one of the largest class actions in consumer financial history.
Tens of millions of people had been treated with contempt and tens of billions of pounds had been wrongfully extracted. The institutions responsible were among the most powerful in the world.
The stage was set for a reckoning, an opportunity to bring an industry that exploits and cheats consumers to heal.
But this reckoning missed the mark.
Instead the FCA, the regulator charged with protecting consumers from poor financial practice, allowed lenders to mark their own homework and they let themselves off the hook.
It didn’t need to be like this. The initial redress framework, proposed in August 2025, was a statement of intent, promising around £20bn to be returned across 14.2m agreements, yet the finalised scheme estimates lenders will pay just £7.5bn across 12.1m agreements.
Billions of consumer money has simply disappeared – presumably added to the vast balance sheets of banks – with millions of victims now set to receive a fraction of what they are owed. Millions more will receive nothing at all.
This is a regulatory failure on an unprecedented scale. The FCA appears to have caved to lender lobbying and threats, with the British public now paying the price.
Whether the regulator lost its nerve or was always on the side of the banks, the result is the same: a failed market with a watchdog unable to keep watch. Or, as the All Party Parliamentary Group on Fair Banking put it, “it is regulatory capture”.
What adds insult to injury is who the FCA has looked to cast as the villain in this saga: law firms that fought tooth and nail – all the way to the Supreme Court – to secure consumers’ justice have been vilified, seemingly blamed by the FCA for the whole ordeal.
To coincide with the launch of the redress scheme, the FCA announced a “taskforce to crack down on poor practice in motor finance claims” by law firms and claims management companies. Working with the Solicitors Regulation Authority, Advertising Standards Authority and Information Commissioner’s Office, the regulator has said it will “step up efforts” and take “swift action”.
This is laughable. The FCA was first aware of the misconduct of lenders all the way back in 2015/16, yet it took till 2026 for their redress scheme to be introduced. It seems “swift” only works one way.
Not a single lender found to have acted wrongfully by the courts has faced regulatory action, no reason has been given why not, and there does not seem to be any desire to fine anyone for what must be the worst consumer scandal since PPI.
And yet the regulator has found the appetite and agility to target the companies that have fought the consumers’ corner.
No one disputes that there are bad actors in the claims sector, but they are a minority rather than the majority. In the banking industry it is the other way around – the wrongdoing was systemic with the majority complicit in fleecing consumers.
The problem is not us but a financial industry that exploits consumers and a regulator that has proven to be unwilling – or unable – to hold the sector to meaningful account.
We will continue to fight to achieve justice for those denied it by the FCA. At Consumer Rights Solicitors, we have already launched 30 separate omnibus claims involving over 15,000 agreements and are also pursuing additional claims on an individual basis.
The British public deserves better than this sham of a scheme – this is far from the end of the road.
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