Durkin: 45% of claims will need to go to court even with the scheme
Drivers are eyeing up litigation instead of waiting for the legal challenge to the motor finance compensation scheme, a solicitor has claimed in the wake of the date of the hearing being set.
Directions issued by the Upper Tribunal yesterday said the nine-day hearing will start on 16 February 2027.
The Financial Conduct Authority’s (FCA) scheme is being challenged by three lenders – Volkswagen Financial Services (VWFS), Mercedes Benz Financial Services, and Crédit Agricole Auto Finance – and by consumer rights group Consumer Voice.
The FCA insisted: “Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly.”
Kevin Durkin, director at HD Law – who brought the successful claim in the Supreme Court case on motor finance commissions – said the time it would take to get a decision from the Upper Tribunal meant drivers faced “yet another year without being paid a penny under the regulator’s scheme”. It could be even longer if the lenders won any part of their challenge.
Mr Durkin said drivers were “quite rightly fed up with waiting” and were turning to solicitors to take legal action instead.
“We’ve seen a 311% rise in claims compared with the same time last year, reflecting the growing appetite among consumers to pursue the compensation they believe they are owed. We expect demand to continue for as long as the scheme remains tied up in judicial review proceedings.”
He said HD Law estimated that more than 45% of claims would still need to be pursued through litigation, even if the FCA scheme came into force. These could include claims that fell outside the scheme, were affected by its caps or involve losses that exceeded the compensation on offer.
“Ultimately, consumers also need to consider how much compensation they could receive. The FCA has proposed an average payment of £829 under its scheme, compared with an average of £1,800 in redress secured for our clients through the court process.”
Alex Neill, co-founder of Consumer Voice, said it had been ready for the hearing to take place this year.
“The FCA and lender applicants blame each other for the delay. The FCA’s approach to disclosure has been heavily criticised by all parties whilst the FCA blames the lenders’ requests for extensive disclosure of underlying data and reliance upon fresh expert evidence as the cause of the trial being pushed into next year.
“We reviewed the FCA’s data during the consultation of the schemes and submitted our primary expert evidence in April with our legal challenge. By contrast, the lenders only now are embarking upon the process of reviewing the data with their experts.”
Ms Neill said the FCA made “two striking concessions in court”: that it could have adopted a scheme which “made even less effort” to identify the loss to consumers and that the car finance market could have withstood a more generous scheme for consumers.
“We remain resolute and confident in our challenge, the only one made on behalf of millions of consumers who are being short-changed by the redress scheme. Now the February trial date has been fixed, the FCA and the lenders must not be allowed to delay it further. We want to get on with the case.”
She added that the FCA should withdraw “the threat to walk away from a mass redress solution” and instead fix “the obvious flaws” in it.
A spokeswoman for VWFS said it welcomed the tribunal’s decisions requiring the FCA to disclose the data and analysis underpinning its proposed redress scheme and permitting the use of expert evidence.
“We have consistently said that we support redress where customers have been genuinely disadvantaged. However, it is important that any scheme is fair, properly targeted, and lawful. We do not believe the FCA’s proposed scheme meets those principles, which is why we have brought this appeal.
“The tribunal’s decisions will ensure that it has access to the evidence necessary to properly assess the FCA’s proposals.”
Both Kevin Durkin and Alex Neill will be speaking at next week’s Claims Futures conference [1].