Advocacy group Consumer Voice has called on the Financial Conduct Authority (FCA) to ensure that consumers are put first in its car finance redress scheme, after publishing its response to the regulator’s recently closed consultation alongside new research that it says highlights:

• the extent of the harm caused by car finance mis-selling;
• the lack of trust in lenders held by consumers; and
• the public appetite for an easy-to-access redress scheme.

In its Consultation response report, Consumer Voice highlighted five key concerns about the scheme and outlined five specific actions it said the regulator should take to ensure the scheme adequately compensates those harmed by car finance mis-selling.

1. The FCA’s redress scheme must be opt-out, wherever possible

Consumer Voice’s research identified that:

• only 7% of people trust their lender to give impartial information; and
• 57% favour an opt-out redress scheme (meaning consumers would be automatically included unless they chose to opt out), rising to 71% among those with several car finance agreements.

Given these findings, the group says that consumers should not have to 'bear the burden' of navigating the scheme's eligibility rules or interpreting lenders' legalese. It is also unsurprising that more consumers with several agreements would be in favour, as an opt-out scheme would dramatically reduce the actions they would need to take.

Consumer Voice noted that an opt-out model ensures that those most likely to miss out under an opt-in scheme will receive the compensation they are owed, highlighting older consumers, low-income households, and those who cannot remember who financed their car finance agreement(s). The group believes that opt-in should apply only when lenders lack the records to identify or locate their past customers. This would mean that a potentially significant number of consumers whose agreements concluded six or more years ago, or who have had car finance that has concluded within the last six years but have moved house or otherwise may not be able to be located by their lender(s), would need to contact their lender(s) themselves.

We respectfully disagree with this. We have previously identified the proposed lender-led nature of the FCA's redress scheme as a concern and one of several reasons why consumers may consider using a solicitor to manage their car finance mis-selling claim, to ensure independent verification of their eligibility and that they receive a compensation award representative of their overpayment.

2. High-commission arrangements are defined too narrowly

The FCA’s proposals defined excessive commission as agreements where the commission was:

• 35% or more of the total cost of credit; and
• 10% or more of the total loan amount.

Consumer Voice says, based on its findings, that the total cost of credit figure is too high, and that a ‘materially lower threshold’ of 15-20% of the total cost of credit would be a better reflection of consumer expectations and ‘more accurately capture the point at which commission structures become capable of influencing outcomes in a way consumers would want to know about.’

The group made these comments after disclosing that its research had found that:

• 30% of consumers would reconsider a deal at a 10% increase in cost;
• 63% would do so at 15%; and
• 93% would do so at 20%.

An adjustment to the regulator's proposals to broaden the definition of excessive commission to cover consumers who paid 15-20% or more of the total cost of credit, rather than the proposed 35%, could make far more consumers eligible for compensation. We support these comments.

3. The regulator’s APR adjustment risks under-compensation

Notes 3.28 and 3.29 in the regulator’s redress scheme consultation paper CP25/27 state that the following regarding discretionary commission arrangements (DCAs) and compensation calculations:

3.28 Our analysis of approximately 230,000 agreements between January 2019 and January 2021 finds that APRs on loans with two types of DCAs – reducing difference-in-charges (DiC) or scaled commission models (these models are described in the Diagnostic Report) – were typically 20–24% higher than comparable flat fee loans.

3.29 In other words, borrowing costs on loans with a flat fee commission structure were on average 17% lower than comparable loans with reducing DiC or scaled commission models. This is broadly consistent with other analysis we have carried out, which found that, following our 2021 ban on DCAs, average APRs fell by around 20% compared to a control group of personal loans, indicating that DCAs were driving higher costs for consumers before the ban. This is also likely to be a lower bound to the losses faced by consumers as it looks at how much more consumers paid than they would have done in a transparent market and not the losses involved with receiving an unsuitable product or the erosion of trust and confidence.

Consumer Voice believes the 17% figure 'is not sufficiently evidenced' because it is based only on 2019-2021 data, after the FCA's work in the motor finance sector pre-2019 had already influenced lender behaviour. The group also cites ‘clear evidence’ that pricing distortions were greater before the regulator banned the use of DCAs on 28 January 2021. Indeed, the regulator’s own data, highlighted in Figure 7: Number of agreements by commission arrangements (LHS) and proportion of agreement by commission arrangements (RHS), April 2007 – October 2024, on page 162 of CP25/27, itself demonstrates that DCA use fell dramatically between these dates, having been used in 90% of car finance agreements in 2007.

Consumer Voice says that any understatement of the APR will mean millions of consumers are under-compensated and stated the regulator should introduce a commission repayment remedy if it cannot demonstrate a more accurate and representative adjustment. We agree.

4. The proposed compensatory interest rate is unfair

We have previously addressed the debate and issues around the FCA’s proposed compensatory interest rate in our analyses of why car finance mis-selling was not a victimless technicality and the hidden impact of mis-selling on the ‘real’ economy.

Consumer Voice agrees with the regulator's proposal to use a simple, standard rate, but not with the proposed rate based on the Bank of England base rate plus 1%, which would result in compensatory interest paid at an average rate of only around 2.09%.

The group cites the Competition Appeal Tribunal’s (CAT) ruling in Kent v Apple, in which the CAT concluded that 8% simple interest ‘is the correct rate for compensating private individuals’ and that this rate reflects the borrowing costs consumers incur when deprived of money, a vital point covered in our own analyses, and one that has been missing from much of the broader discourse around compensatory interest.

Consumer Voice’s research uncovered some of the impact that car finance mis-selling had on consumers, finding that:

• 19% struggled to pay bills;
• 13% used further credit; and
• 10% borrowed from family and friends.

The group says that compensatory interest is intended to address these issues, and that the FCA’s proposed rate fails to do this adequately. It is to be hoped that the FCA considers the force of these comments.

5. The FCA must address information barriers and trust issues

Consumer Voice's research found that trust in lenders among consumers is exceptionally low, and that:

• only 22% of consumers recall commission being explained clearly at the point of sale;
• only 41% feel confident they could tell whether the regulator’s redress criteria apply to them; and
• up to 56% do not hold all of their original car finance agreement documents.

The group has called on the FCA, within the scheme, to provide:

• template communications;
• accessible explanations of decisions; and
• proactive supervision of lenders, including the use of skilled persons reviews and transparent publication of performance data at the lender level.

Many consumers will consider litigation

Consumer Voice’s research also uncovered that consumers, particularly those who have already sought professional representation for their car finance claim(s), say they would consider litigation if their compensation awards within the redress scheme fall between £1,000 and £3,000 below what they would reasonably expect to be awarded by the courts.

This itself is a compelling finding when viewed in the context of the All-Party Parliamentary Group (APPG) on Fair Banking’s November 2025 report, Car Finance Scandal: Assessing Redress, in which MPs stated that some consumers may receive more than double the estimated £700 average compensation per mis-sold agreement that the regulator says will be paid via the redress scheme were they to go to court.

Based on these findings, many consumers may be very close to that £1,000 threshold, which, given Consumer Voice's numbers, could lead to a significant cohort of consumers choosing not to participate in the redress scheme in pursuit of a larger compensation award via the courts. We are able to support consumers in making claims through the courts.

Consumer Voice’s five actions for the regulator

Consumer Voice, which praised the regulator for acting decisively on car finance mis-selling, wants the regulator to execute the following five actions, saying that this will allow consumers to trust the redress scheme and ensure that those who suffered financial harm are appropriately compensated.

1. Default to an ‘opt-out’ scheme wherever lenders hold inadequate records.
2. Adopt a lower threshold and definition of excessive commission.
3. Revisit the APR adjustment to ensure it reflects the accurate scale of historic harm.
4. Apply an 8% compensatory interest rate.
5. Ensure robust oversight and transparency, given the public's low levels of trust in lenders.

Start your car finance claim now

The FCA’s proposed car finance redress scheme means that you will be able to claim any car finance mis-selling compensation you are eligible for yourself, and at no cost.

However, Consumer Voice's findings, allied to warnings that lenders may seek a judicial review of the redress scheme, potentially causing further delays to compensation payments, are among several compelling reasons why you may consider instructing a solicitor to manage your claim. In addition to ensuring that you receive the car finance mis-selling compensation you are rightly owed, a solicitor can also examine the potential for additional claims, such as whether hidden commissions were applied to GAP insurance or other add-ons, or whether you may have grounds to bring an irresponsible lending claim.

Register your car finance mis-selling claim with Harcus Parker here.