- The FCA is facing a legal challenge over its £9.1bn compensation scheme.
- Consumer Voice alleges its chief executive was warned of consequences if it challenged the plan.
- The regulator says it does not recognise that account and says it will defend the scheme.
The UK’s £9.1 billion car finance compensation scheme has run into another legal dispute, this time over an alleged attempt by the financial regulator to discourage a consumer group from challenging the payout plan.
Consumer Voice claims Financial Conduct Authority (FCA) chief executive Nikhil Rathi warned its directors that the regulator could stop working with the group and brief against it if it went ahead with legal action. The allegation, contained in documents filed with the Upper Tribunal, adds a new layer to a scandal that has already put lenders, regulators and consumer groups on opposing sides.
The dispute centres on the FCA’s plan to compensate millions of motorists who may have been overcharged through car finance arrangements involving dealer commissions between 2007 and 2024.
The fight over £9.1bn
Consumer Voice says the proposed scheme does not go far enough. It argues that the average payment of about £830 per affected loan undervalues the financial harm suffered by consumers and gives too much weight to the interests of lenders.
The group is seeking a larger payout through its legal challenge, making it the only party among the current challengers arguing specifically for consumers to receive more compensation.
According to the legal documents, the alleged conversation between Rathi and Consumer Voice directors took place on April 27, shortly before the deadline for challenging the scheme. The group claims Rathi said the FCA would be “unable to collaborate” with it if legal action went ahead and that this could result in adverse consequences for its future relationship with the regulator.
Consumer Voice further claims Rathi described its challenge as the biggest risk to the scheme and warned that legal action could prevent compensation from reaching millions of motorists by Christmas.
The FCA disputes that characterisation.
The regulator said officials had spoken to a range of parties before the legal deadline, including lenders and claims firms, and that it was important to explain the consequences of legal action and defend what it considers the best route to getting compensation to consumers.
The FCA also said it did not know about challenges being prepared by three specialist lenders until after its conversation with Consumer Voice.
Why the regulator and consumers are clashing
The disagreement comes as the FCA itself attempts to have Consumer Voice’s legal challenge dismissed.
The regulator has questioned the consumer group's funding and business relationships, arguing that its links with law firm Courmacs Legal create commercial incentives. Consumer Voice says it works with law firms to help consumers recover money from companies accused of breaking rules.
Courmacs is representing Consumer Voice on a pro bono basis in the case, although the law firm could ultimately benefit if consumers receive larger settlements because it can take a share of compensation from clients it represents.
The legal fight therefore involves competing interests on several fronts: the FCA wants its compensation scheme to proceed, specialist lenders are challenging parts of it, and Consumer Voice wants the tribunal to consider whether consumers should receive more.
For motorists waiting for compensation, the central question is what happens next. The FCA has argued that its scheme provides a structured route to getting money to millions of people, while Consumer Voice maintains that those consumers are being short-changed.
Consumer Voice co-founder Alex Neill said the organisation remained confident in its challenge on behalf of consumers.
The Upper Tribunal will now have to consider the competing arguments, including the dispute over how the FCA handled the group's decision to challenge the scheme.
