Consumer Voice has raised fresh objections to the Financial Conduct Authority's Motor Finance Compensation Scheme [1], including questions over compensation calculations and the Treasury's involvement in discussions before the scheme was finalised.

The consumer group is one of four parties challenging the lawfulness of the scheme before the Upper Tribunal. New court filings have provided further detail about its case against the regulator, including claims that the FCA gave too much consideration to the financial impact of compensation on lenders.

Consumer Voice has also questioned discussions between the FCA and the Treasury while the compensation framework was being developed.

The FCA rejects these arguments and says it took all decisions on motor finance independently. It continues to defend the scheme as lawful and says an industry-wide programme provides the quickest and most cost-effective way of delivering fair compensation to affected consumers.

The competing arguments have yet to be determined by the Upper Tribunal.

Consumer Voice Questions Compensation Calculations

One of Consumer Voice's central objections concerns the methodology used to calculate redress.

The group argues that elements of the FCA car finance redress scheme approach could result in some consumers receiving less compensation than would otherwise be appropriate for the losses they experienced.

One area of disagreement concerns the minimum interest applied when compensation is calculated.

The FCA's methodology provides for minimum compensatory interest of 3% [2]. Consumer Voice argues that this does not sufficiently reflect the borrowing costs faced by some consumers and alleges that the regulator placed too much weight on the overall cost of the scheme to lenders.

These are arguments advanced by Consumer Voice as part of its legal challenge. The Upper Tribunal has not determined that the FCA's methodology undercompensates motorists or is unlawful.

FCA Says Scheme Was Designed to Deliver Fair Compensation

The FCA takes a different position.

It says its objective is to ensure consumers receive fair compensation as quickly as possible while maintaining a healthy motor finance market.

The regulator argues that an industry-wide scheme is simpler and more efficient than requiring millions of individual complaints to proceed separately.

It also says the final framework reflects extensive engagement with both sides of the market.

More than 1,000 responses were received during consultation, with the FCA engaging with consumer organisations, professional representatives, lenders, manufacturers, investors and industry bodies before confirming the final scheme.

The regulator says changes were made following that feedback and maintains that the final framework is fair to consumers and proportionate for firms.

How Much Compensation Could Consumers Receive?

The FCA estimates that around £7.5 billion could ultimately be returned to consumers, assuming a 75% participation rate [3].

Including the cost of administering the programme, the overall cost to the motor finance industry has been estimated at approximately £9.1 billion.

More than 12 million agreements could potentially be eligible for compensation under the scheme.

Average car finance compensation is estimated at approximately £829 per eligible agreement.

However, that figure is an average rather than a fixed payment for every successful mis-sold car finance claim.

Individual redress will depend on the circumstances of the agreement and the methodology contained within the FCA's final rules.

It is that methodology that Consumer Voice is now seeking to challenge.

Consumer Voice Raises Questions Over Treasury Involvement

The group's latest court filings also raise questions about discussions between the FCA and HM Treasury while the compensation scheme was being developed.

Consumer Voice claims internal documents show the FCA was in regular discussions with the Treasury [4] and refers to material suggesting the regulator sought a Treasury "steer" before publishing its consultation.

The group argues that this, combined with the Government's previous attempt to intervene in the Supreme Court motor finance proceedings, supports an inference that the Treasury wanted compensation set at a level that lenders could absorb.

This is Consumer Voice's interpretation of the documents. The filings do not establish that the Treasury instructed the FCA to cap compensation.

The FCA rejects the suggestion that the Treasury determined how the compensation scheme was designed.

It said discussing motor finance with the Treasury was appropriate but that the Government department had no role in designing the scheme. The regulator says all decisions relating to motor finance were taken independently.

The Treasury has also responded, saying it wants the motor finance issue resolved efficiently and in an orderly way that provides certainty for consumers and firms.

The extent and significance of the discussions will therefore form part of the wider arguments surrounding Consumer Voice's challenge rather than being an established finding that compensation was capped by Government intervention.

Why Was the Treasury Interested in Motor Finance?

The Government has previously expressed concern about the wider economic consequences of uncertainty in the motor finance market.

The Treasury attempted to intervene in the Supreme Court proceedings concerning motor finance commissions before the Court ultimately considered the case [5].

That application was rejected in February 2025.

Consumer Voice has pointed to that earlier intervention when arguing that the Treasury was concerned about the potential financial consequences of widespread compensation for lenders.

Government interest in the economic consequences of the issue does not, by itself, establish that it controlled the FCA's eventual compensation methodology.

The FCA maintains that the scheme was independently developed under its statutory responsibilities.

Separate Allegations Concern April Meeting With FCA

Consumer Voice's legal filings have also brought attention to a meeting with FCA chief executive Nikhil Rathi on 27 April.

According to allegations reported from the filings, Consumer Voice claims it was warned about possible consequences if it continued with its legal challenge.

The Guardian reported that the allegations relate to a Microsoft Teams meeting and claims concerning the FCA's future engagement with Consumer Voice and potential public communications about the organisation [6].

The FCA rejects Consumer Voice's characterisation of the discussion.

It says it did not threaten the organisation and points to continued engagement with Consumer Voice following the meeting.

Again, these are contested allegations contained within an ongoing legal dispute rather than established findings about the regulator's conduct.

FCA Has Raised Its Own Concerns About Consumer Voice

The disagreement between the two organisations is not one-sided.

The FCA has itself raised concerns about Consumer Voice's challenge, including questions concerning the group's commercial interests and its relationship with the legal firm representing it.

The regulator has argued that these arrangements are relevant when considering Consumer Voice's interest in seeking changes to the scheme.

The FCA has also previously warned that legal challenges could delay compensation for consumers.

Its position is that consumers can use the compensation scheme for free and do not need professional representation to participate.

Consumer Voice disputes the FCA's arguments against its challenge.

These competing claims will ultimately be matters for the legal process to consider.

Consumer Voice Is One of Four Challengers

The legal proceedings extend beyond Consumer Voice.

Three motor finance lenders are separately challenging the scheme: Volkswagen Financial Services, Mercedes-Benz Financial Services and CA Auto Finance UK.

The FCA's official Upper Tribunal documents confirm all four challenges and include the applications, the regulator's grounds of response and replies from each challenger.

The parties are not all arguing for the same outcome.

Consumer Voice's challenge centres on concerns that aspects of the scheme do not provide sufficient redress to consumers.

The lender challenges raise separate objections to the legality and methodology of the framework.

The Upper Tribunal will therefore have to consider arguments coming from both consumer and industry perspectives.

What Does the Legal Challenge Mean for Motorists?

For consumers, the existence of the challenges does not mean the Motor Finance Compensation Scheme has been cancelled.

The Upper Tribunal partially suspended parts of the programme in July on terms agreed between the FCA and the four challengers [7].

The FCA says the partial suspension allows lenders to continue preparing and progress complaints as far as possible while avoiding work that might have to be repeated if one or more of the challenges succeeds.

Firms must continue complying with all rules that have not been suspended.

That includes identifying relevant complaints and agreements and gathering information needed to establish commission arrangements and disclosure practices.

Consumers can also continue making complaints about historic motor finance agreements.

Who Could Potentially Have a Car Finance Claim?

The scheme covers certain motor finance agreements entered into between 6 April 2007 and 1 November 2024.

It was introduced following regulatory investigations and court proceedings concerning historic commission arrangements and the information provided to consumers.

The scheme includes certain circumstances involving discretionary commission arrangements, excessive commissions and undisclosed commercial relationships.

Not every agreement within the period qualifies.

Someone who used PCP car finance does not automatically have a valid PCP claim, and having an historic finance agreement does not by itself establish car finance mis-selling.

Eligibility for car finance claims and PCP claims or PCP finance claims depends on the circumstances of the individual agreement and whether the FCA's criteria are satisfied.

When Will the Upper Tribunal Hear the Challenges?

The Tribunal has identified two possible hearing windows.

The challenges could be heard from 14 to 18 December 2026 or 16 to 26 February 2027.

The final dates depend on whether further expert evidence or disclosure is requested and permitted.

A decision will follow the hearing, although further legal proceedings remain possible.

Until then, questions surrounding Consumer Voice's compensation arguments, the lender challenges and the final operation of the scheme remain unresolved.

FCA Continues to Defend the Scheme

Despite the legal challenges, the FCA continues to maintain that the compensation scheme is the best way to resolve a widespread and long-running issue.

The regulator says courts and its own review found failures to disclose important information to consumers and that an industry-wide scheme provides a more efficient route to redress than processing millions of complaints individually.

Consumer Voice believes aspects of that framework should change. Three lenders are challenging it for different reasons.

Those disagreements are now for the Upper Tribunal to consider.

For consumers, the important point is that allegations that the Treasury sought to cap payouts, claims that the FCA's methodology provides insufficient compensation and the allegations surrounding discussions between Consumer Voice and the regulator are all contested arguments within ongoing proceedings.

The scheme remains in place, although parts are temporarily suspended.

Consumers who believe they may have a claim in relation to the wider car finance scandal can still complain directly to their lender for free while the legal process continues.

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References:

1. Consumer Voice has raised fresh objections to the Financial Conduct Authority's Motor Finance Compensation Scheme - https://www.easterneye.biz/nikhil-rathi-accused-threatening-consumer-group-over-ps9-1bn-car-finance-scheme/ 
2. The FCA's methodology provides for minimum compensatory interest of 3% - https://www.independent.co.uk/news/uk/home-news/car-finance-redress-scheme-fca-b3042786.html 
3. The FCA estimates that around £7.5 billion could ultimately be returned to consumers, assuming a 75% participation rate - https://www.fca.org.uk/publication/policy/ps26-3.pdf
4. Consumer Voice claims internal documents show the FCA was in regular discussions with the Treasury - https://cardealermagazine.co.uk/fca-accused-of-putting-lenders-before-drivers-with-9-1bn-motor-finance-compensation-scheme/327058
5. The Treasury attempted to intervene in the Supreme Court proceedings concerning motor finance commissions before the Court ultimately considered the case - https://www.theguardian.com/business/2025/jan/21/rachel-reeves-car-finance-case-lenders-shares-lloyds-close-brothers
6. The Guardian reported that the allegations relate to a Microsoft Teams meeting and claims concerning the FCA's future engagement with Consumer Voice and potential public communications about the organisation - http://theguardian.com/business/2026/sep/01/boss-of-city-regulator-accused-of-threatening-consumer-group-over-91bn-car-loan-scheme
7. The Upper Tribunal partially suspended parts of the programme in July on terms agreed between the FCA and the four challengers  - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended