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The head of the UK’s financial watchdog has pushed back at industry claims that the wide scope of the motor finance redress scheme is “impractical”.
Nikhil Rathi, chief executive of the Financial Conduct Authority said: “We know it is difficult. But you can’t say the law has been broken and it is too difficult to even try to put things right.”
He added the redress scheme covering agreements going back to 2007 – in line with complaints that the Financial Ombudsman Service (FOS) can consider – was not “completely impractical,” referencing criticism from trade associations.
Stephen Haddrill, director general of the Finance & Leasing Association, had branded the time frame a “major concern”.
“I just think that is completely impractical. It is not just firms that don’t have the details about contracts back then, customers don’t either,” Haddrill told the BBC.
Complaints to the FOS soared to their highest since the PPI scandal for the year ending March 31 2025, after motor finance grievances made a near-500 per cent jump to 73,328.
But following the Supreme Court handing lenders a partial win as they sought to overturn the Court of Appeal’s ruling that it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent, Rathi has urged banks to co-operate.
The head of the City regulator told the Financial Times: “Now is not the time to haggle with us but to help put things right for consumers”.
Banks ride high after Court ruling
The chair of specialist lender S&U told City AM on Monday he hoped the “change of tone and tenor” in the FCA would “persist” as the regulator progresses on a redress scheme.
The watchdog confirmed it would consult on the scheme on Sunday, estimating costs between £9bn and £18bn. Whilst still a hefty sum for the lending sector, it skirts highs of £44bn previously feared.
Rathi said he “absolutely” wanted to ensure this was the final “mass redress” scheme imposed on Britain’s banking industry.
“This is the only significant redress issue we have on our radar so if we can get this sorted speedily and expeditiously, we hope that can give everybody confidence for the future,” he added.
City banks were handed an over £7bn stock boost on Monday as investors flocked back to lenders following the top Court’s ruling.
Lloyds Banking Group bolstered its market capitalisation by over £3.5bn surged to a five-year high. Meanwhile Close Brothers soared over 20 per cent on the back of its legal win, sealing an extra £120m.
Chancellor Rachel Reeves has taken an active stance in the saga after she unsuccessfully attempted to intervene in the Supreme Court case earlier this year and then was reported to be exploring routes to overturn an adverse ruling.
A Treasury spokesperson said on Friday: “We respect this judgment from the Supreme Court and we will now work with regulators and industry to understand the impact for both firms and consumers.”
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