FCA chief executive Nikhil Rathi accused of threatening Consumer Voice over redress scheme

Important update: The FCA redress scheme is partially suspended

This article was written before recent developments around the FCA’s redress scheme. If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, please note the following:

• The redress scheme is partially suspended: The Upper Tribunal will hear four challenges to the scheme between 16 and 26 February 2027. Lenders are not currently required to calculate or pay redress, and payments are not expected to begin until 2027 at the earliest. Your lender should write to you if you have already complained and you are not owed compensation, although the FCA says some consumers may not be told until the legal process concludes.
• Revised eligibility estimate: The FCA now estimates that 12.1 million agreements are eligible for compensation, down from the 14.2 million estimated in its 2025 consultation.
• Increased compensation estimate: The FCA now anticipates average redress payouts of £829 per mis-sold agreement.
• Compensatory interest changes: The regulator has introduced a minimum 3% floor for compensatory interest; however, the rate applied to awards within the redress scheme can no longer be challenged.
• You may not hear from your lender: If the scheme proceeds, contact obligations also cover certain consumers who have not complained, including those potentially owed compensation and certain time-barred cases. If you do not hear from your lender, you could still have a valid claim but risk missing out entirely.

Financial Conduct Authority (FCA) chief executive Nikhil Rathi has been accused of threatening Consumer Voice with ‘adverse consequences’ if it blocked the regulator’s £9.1bn redress scheme.

The Guardian reported that it had reviewed legal documents claiming that Mr Rathi’s alleged comments amounted to ‘an inappropriate intervention by a public official’. The comments were reportedly made during a Microsoft Teams call with the directors of Consumer Voice on 27 April 2026. The timing of the call is notable, coming on the day that Consumer Voice confirmed it would challenge the scheme, following earlier reports that it would do so, and hours before the deadline for lodging legal challenges against the scheme. For its part, the regulator published a statement on 23 April 2026, at which point the media was already reporting that Consumer Voice would challenge the scheme, calling on law firms and claims management companies to consider the position of their clients.

According to the report, Mr Rathi warned that the FCA would be ‘unable to collaborate’ with Consumer Voice if it took legal action, ‘suggesting adverse consequences for [Consumer Voice]’s future engagement with the FCA and adverse press briefings against it’. The report went on to say that the document claimed that ‘the implication was clear: the FCA’s willingness to engage constructively with [Consumer Voice] was contingent on [Consumer Voice] not challenging the scheme, and would give way to hostility if it did’. The Guardian added that, up until that point, the regulator had treated the advocacy group as a ‘trusted expert consumer body’, but that Consumer Voice’s decision to challenge the scheme meant that ‘the FCA changed its position…now the FCA seeks to denigrate [Consumer Voice]’s activities and motives in bringing this application’.

Mr Rathi is also reported to have claimed that Consumer Voice’s potential legal challenge was the ‘biggest risk to the scheme’ and that plans to get redress to millions of consumers before Christmas 2026 would fail were the group to follow through with its plans to seek a review of the scheme. The filings state that it was not disclosed on the call that three specialist lenders were also planning to challenge the scheme, only that the FCA had been ‘engaging with the banks’, who had decided over the previous weekend not to challenge the scheme.

How the FCA describes the call

The regulator disputes Consumer Voice’s account. A spokesperson told the Guardian that ‘we don’t recognise the way this conversation has been characterised’, adding that officials had spoken to a range of parties, including lenders and claims firms, ahead of the deadline for lodging a challenge. ‘It was important to explain the implications for consumers and that we would defend the scheme robustly as the best way of getting compensation paid,’ the regulator said. ‘We were also clear that we would be upfront with consumers about why expected compensation would be delayed.’ The FCA also said that it did not know about the specialist lenders’ challenges until after the call with Consumer Voice, and that its staff have continued to engage with the advocacy group since, including on how to handle settlement offers made outside the scheme.

Treasury accused of seeking to cap payouts

These allegations surrounding Mr Rathi came on the same day that City AM published a report that said Consumer Voice had stated in filings that former Chancellor of the Exchequer Rachel Reeves’s attempt to intervene in the Johnson, Wrench and Hopcraft appeals ‘gives rise to a reasonable inference that HMT ‘steer’ received by the FCA in the context of the [redress scheme] was to ensure redress payments would be at a level that could readily be absorbed by lenders’. The Supreme Court rejected that application to intervene in February 2025, ahead of the hearings that took place in April 2025.

The FCA denies that the Treasury had any part in shaping the scheme. City AM reported a spokesperson as saying: ‘We consulted openly and extensively, and it was entirely appropriate that we’d discuss motor finance with the Treasury. But it had no role in designing a compensation scheme that aims to put £7.5bn back in people’s pockets. We’ve taken all decisions on motor finance independently.’ A Treasury spokesperson reportedly said it wanted ‘to see this issue resolved in an efficient and orderly way that provides certainty for consumers and firms’.

Lenders accuse the regulator of working backwards

A separate City AM report also published on the same day carried accusations by the three lenders challenging the scheme that the regulator had ‘worked backwards’ to justify paying motor finance redress, with Mercedes-Benz stating in court filings that ‘the approach taken is the result of the [FCA] having started from the erroneous conclusion that such [commission] arrangements [that the scheme addresses] were harmful and working backwards in order to justify that view’.

The lender also claimed that ‘overmuch emphasis’ had been placed on the FCA’s ‘expertise as the sector regulator, implicitly suggesting that substantive errors of law can and should be disregarded if there are policy reasons to do so’.

Volkswagen Financial Services stated that ‘the FCA’s approach…is based mostly on the repeated invocation of the mantra of ‘regulatory judgement’ as some kind of impregnable shield against the applications’, while Crédit Agricole, the third lender challenging the scheme, said the ‘idiom is both misplaced and, worse, indicates a fundamental misunderstanding by the FCA of the nature of its power’. Volkswagen Financial Services also argued that, because borrowers under motor finance agreements do not themselves pay the commission, there was no commission capable of being repaid to them. The regulator called that reading of the scheme ‘absurd’ and said that lenders want to ‘let the foxes guard the hen house’.

FCA questions Consumer Voice’s motives and funding

The FCA has separately sought to have Consumer Voice’s claim struck out, arguing that its co-founders have not been transparent about the group’s funding and potential conflicts of interest. In filings lodged in August 2026, the FCA said that Consumer Voice and Courmacs Legal both ‘operate for profit in the sphere of claims management’, that Courmacs had previously hired Consumer Voice to carry out consumer research, and that the group ‘therefore has commercial incentives of its own’. Courmacs is acting pro bono in the challenge itself, although it takes up to 30% of client settlements in the claims it runs.

Consumer Voice’s substantive case is that the scheme pays too little. It argues that the average payout of £830 per mis-sold agreement is too low, and that the FCA has put the interests of lenders facing large bills ahead of the consumers it exists to protect. It is the only one of the four challengers arguing for more compensation rather than less. Consumer Voice co-founder Alex Neill said: ‘We remain resolute and confident in our challenge on behalf of millions of consumers who are being short-changed by the redress scheme.’

Regulator continues to defend itself and the scheme robustly

The FCA maintains that its scheme is the fairest and quickest route to redress. City AM reported a spokesperson as saying: ‘Our scheme is the quickest, fairest and most efficient way to put £7.5bn back in consumers’ pockets and we are defending it robustly. It is unfortunate the challenges have delayed payouts for consumers that were due to begin this year, especially as household bills come under greater pressure.

‘We will respond fully to these challenges in court.’

These are allegations made in contested litigation, and none has been tested. Conduct of the kind described would be surprising, and the FCA rejects that characterisation. The regulator has held the same public position since it launched its consultation with Consultation Paper CP25/27 on 7 October 2025, and it may yet be vindicated on all of it. Our concern is narrower. Every month this argument continues is a month in which people who were treated unfairly go uncompensated, and none of the parties to the dispute is bearing that cost.

Do these reports change anything for my claim?

No. These allegations concern how the scheme was designed and how the regulator has conducted itself, not whether you are eligible. The redress scheme remains partially suspended and the Upper Tribunal will hear the four challenges in December 2026 or February 2027.

Should I wait to see what happens?

The FCA has consistently advised consumers to complain as soon as possible and we would echo that advice. Complaining to your lender costs nothing, and your complaint will remain live regardless of the outcome of these proceedings.

Why do some reports say £7.5 billion and others say £9.1 billion?

£7.5 billion is the regulator’s estimate of how much money will be returned to consumers. The £9.1 billion figure is the estimated total cost to lenders, which also includes the costs of running the redress scheme.

Have these allegations been tested?

No. They appear in court filings made by parties challenging the scheme, and the FCA disputes them. The Upper Tribunal has ruled on none of it, and may not need to decide these points in order to determine the outcome of the challenges.

Register your motor finance claim with Harcus Parker

You do not need professional representation to complain to your lender or to receive any motor finance compensation you are owed, and you can do so at no cost. Nor does instructing a solicitor guarantee that you will receive compensation or that you have an eligible claim. There may, however, be several benefits of using a solicitor for your motor finance claim.

Check your eligibility and register your claim with Harcus Parker here.