House of Lords peers have challenged the Financial Conduct Authority’s (FCA) plan to make its upcoming motor finance redress scheme cover agreements dating back to 2007, arguing the move may lack a clear legal basis under the Consumer Credit Act (CCA) and could inflate costs for lenders.

In a letter to FCA chief executive Nikhil Rathi on 8 August 2025, the Financial Services Regulation Committee — chaired by The Rt Hon. the Lord Forsyth of Drumlean — said the regulator’s proposed timeframe should be reconsidered in light of the CCA’s six-year limitation period, as confirmed by the Supreme Court in Smith v Royal Bank of Scotland [2023] UKSC 34, of 4 October 2023.

Download the Lord Forsyth’s letter HERE

Under the CCA, claims for an “unfair relationship” between lender and borrower must be brought within six years of the end of the finance agreement. In its recent judgments in the Hopcraft, Johnson and Wrench cases, the Supreme Court reaffirmed that limitation period.

However, the FCA has indicated it will set the start date at 2007, citing consistency with consumers’ rights to take complaints to the Financial Ombudsman Service. The committee warned this approach could go significantly beyond what the CCA provides for in court proceedings.

“The Committee considers that a period which is aligned with the limitation period for bringing a claim in the courts, specified by the Supreme Court, may be more appropriate,” Lord Forsyth wrote, asking what legal advice supported the regulator’s position and “what legal grounding underpins the FCA’s proposed timeframe.”

The FCA has estimated that covering agreements back to 2007 could cost the industry between £9 billion and £18 billion, figures which peers said have already impacted listed lenders’ share prices. The committee pressed the FCA to share modelling for a scheme limited to the six-year CCA period, and to assess whether such a restriction could reduce the cost burden.

Peers also cited the FCA’s own statement that there could be “potentially several billion of admin costs” under its current proposal, and asked how the regulator would ensure these costs were proportionate to the redress paid.

Finally, they requested evidence for the FCA’s public claim that “a healthy finance market for new and used cars” would continue regardless of the scheme’s scale, and urged the regulator to publish or privately share its market impact modelling.

Warning against “regulatory unpredictability,” the committee said prolonged uncertainty over redress rules could make some financial products “prohibitively expensive” for UK consumers. It has asked the FCA to appear before it in September to address its concerns.

The FCA’s formal consultation on the scheme — expected in the coming weeks — will set out its full legal and economic rationale.