The UK’s All-Party Parliamentary Group on Fair Banking has questioned whether the Financial Conduct Authority’s proposed consumer redress model for historic car finance mis-selling provides adequate compensation, after its analysis showed that average payments under the scheme would fall significantly below levels seen through the courts or the Financial Ombudsman Service.
According to the report, the FCA’s preferred “hybrid” methodology would produce an average payout of around £700 across all qualifying agreements, with typical discretionary commission cases resulting in payments of about £518.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The APPG said the approach “falls way short” of outcomes previously awarded in legal and ombudsman decisions, where redress often reflected full repayment of undisclosed commission plus compensatory interest.
The report also noted that the FCA’s own earlier analysis of consumer loss was materially higher than figures used in the current consultation.
One example referenced an FCA case study in which a consumer awarded £1,326 by the ombudsman would have received “20% more” if decided in line with recent court precedent, but “20% less” under the regulator’s proposed methodology.
For lenders, the APPG’s position introduces a further layer of uncertainty as firms prepare operational plans for a potential industry-wide scheme. While the proposed model may reduce immediate liabilities, the group warned that lower payouts could increase the likelihood of consumers pursuing litigation instead of using the regulatory route.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe report stated that the FCA’s method for calculating loss was “fiendishly complicated”, adding that most consumers would be unable to assess whether the award offered accurately reflected the cost impact of discretionary commission arrangements. It also said the blended formula, combining commission repayment with the regulator’s own loss model, “delivers lower awards than previously recognised benchmarks”.
Industry participants have been awaiting clarity following recent court decisions on undisclosed commission arrangements and the regulator’s wider review of historic motor finance conduct.
The FCA has said the principles guiding the scheme are fairness, timeliness, and certainty. The APPG, however, argued that the current approach may not meet those objectives if compensation levels are perceived as insufficient.
