Legal issues for the UK consumer finance industry
On 7 October 2025, the UK Financial Conduct Authority published its long-awaited consultation on its proposed redress scheme. This involved a press release, a consultation paper and statement to the market.
We’ve prepared our usual one-page infographic summarising the proposals (which is larger if you click on it):
If you want to discuss, please get in touch with me, Leanna or Paula.
It’s always interesting to see the exchanges between the UK Financial Conduct Authority (the FCA) and the House of Lords Financial Services Regulation Committee (the Committee). They usually provide useful insights into the thinking of both the FCA and the Committee.
The letters which have been exchanged following the UK Supreme Court’s decision in Hopcraft & Hopcraft v Close Brothers Limited; Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance; Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2025] UKSC 33 are very interesting. Here are the links:
On 4 August 2025, the UK Financial Conduct Authority (the FCA) published a copy of a letter dated 31 July 2025 that it sent to claims management companies (or CMCs) inviting them to review their financial promotions relating to motor finance claims.
This letter says that between 1 January 2024 and 30 June 2025, the FCA’s engagement with 14 CMCs result in 225 financial promotions being amended or withdrawn.
The FCA also identified a number of concerns including:
– exaggerated claim values;
– falsely implying that refunds have already been secured or are guaranteed;
– creating a false sense of urgency;
– indiscriminately suggesting the contact relates to knowledge of a consumer’s motor finance agreement; and
– signing up consumers without their consent.
CMCs have therefore been reminded to “avoid using clickbait-style promotions or language that suggests a guaranteed outcome before any investigation has taken place. Additionally, given the potential for a redress scheme to be introduced, firms should not use language that implies a false sense of urgency. Such messaging may place undue pressure on consumers and could be considered misleading under the FCA’s rules and the Consumer Duty“.
The FCA expects CMCs to ensure “that all financial promotions are clear, fair, and not misleading, and that they accurately reflect the nature and status of any potential claims”.
The FCA has asked firms to take the following action:
– review and revise financial promotions;
– avoid misleading outcome guarantees;
– remove false urgency; and
– monitor and update promotions regularly.
Earlier today, on 3 August 2025, the UK Financial Conduct Authority published a press release and a statement setting out its plan to consult on a proposed motor finance compensation scheme.
The devil is always in the detail (particularly on a complicated topic like this) so we will need to wait to see what the FCA says (a consultation is likely to be published in October 2025 with a six week period for responses).
If a scheme is made then the FCA says it expects most compensation payments to be ‘no more than £950’ and for payments to be made ‘in 2026’.
But there are many points raised, and questions left unanswered, by the FCA’s announcement. And some parts of their announcement require a lot of work and buy in from Treasury.
The FCA has also published a transcript of a call with market analysts which took place at 5pm on 3 August 2025.
Earlier today, on 1 August 2025, the UK Supreme Court published a press release and its judgment in Hopcraft & Hopcraft v Close Brothers Limited; Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance; Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2025] UKSC 33 dealing with claims relating to commissions paid by lenders to dealers introducing customers entering into motor finance agreements.
The Court decided that:
– for both the claims under the tort of bribery, and in equity, there needed to be a fiduciary duty between the dealers and the customers;
– in typical relationships like these, the dealers did not owe the customers a fiduciary duty sufficient to give rise to a liability in the tort of bribery, or in equity;
– the claims in tort and equity in all three claims would be dismissed;
– in Johnson, where there was also a claim under the unfair relationship provisions in Sections 140A to 140C of the Consumer Credit Act 1974, the Court acknowledged that those provisions were “highly fact-sensitive“. There mere fact that there has been no disclosure, or only partial disclosure, does not necessarily mean a relationship was unfair;
– however, in Johnson there were three factors which the Court found to be relevant to support its conclusion that the relationship was unfair: (a) the size of the commission, (b) the fact that the dealer’s documents did not properly explain the dealer’s role and (c) it was questionable to what extent a customer could have been expected to read and understand the lending documents.
Earlier today, on 5 June 2025, the FCA published a statement entitled ‘Key considerations in implementing a possible motor finance consumer redress scheme’.
The key points from the statement are:
– If the FCA proposes “an industry-wide consumer redress scheme“, it’ll set out rules on how to assess claims and calculate redress. The aim of the scheme would be to make it “easy for consumers to understand and participate in, without needing to use a claims management company (CMC) or law firm“.
– The FCA has been “speaking with consumer groups, firms and industry trade bodies to get their views on important issues to consider if we do introduce a redress scheme“. If the FCA decides to propose a redress scheme, it’ll consult on why and explain how it thinks a scheme could work.
– Given the pre-consultation engagement, the FCA “may decide to have a shorter than normal consultation window (for example, 6 weeks)“.
– There will be seven key principles:
(1) comprehensiveness: the scheme should be as wide “as possible so consumers don’t have to go elsewhere, like court“;
(2) fairness: the approach (both on breach and redress) should be “fair to consumers and firms“;
(3) certainty: providing finality for both firms and consumers;
(4) simplicity and cost effectiveness: easy for consumers to participate and the cost of delivering the scheme should be proportionate for firms;
(5) timeliness: resolve the majority of claims “within a reasonable timeframe“;
(6) transparency: consumers should receive clear explanations of decisions and data on the progress of the scheme should be publicly available; and
(7) market integrity: support the ongoing, long-term availability of high quality, competitively-priced motor finance.
– The FCA acknowledges that there can be tensions between these principles and it will aim to get the balance right.
– Scope of a redress scheme: some features to consider are: (a) opt-in or opt out and (b) calculating redress must be “fair to consumers who’ve lost out” and “ensure the integrity of the motor finance market” (and the FCA acknowledges it has seen some “highly speculative figures by some CMCs and law firms“)
– The FCA continues to say that it’ll “confirm within 6 weeks of the Supreme Court judgment whether we’re proposing to introduce a redress scheme. If so, we’ll also set out timings for when we would issue a consultation“.
– If the FCA proposes to introduce a scheme, the final rules for any scheme would “be in 2026“. The FCA is also keeping under review whether to make any changes to its Handbook.
On 16 April 2025, the UK Advertising Authority (the ASA) published a decision on whether a post on X (formerly Twitter) about claims relating to diesel emissions published by Cambridge Corporate Consultants Ltd t/a The Claims Guide (The Claims Guide) was misleading. The ASA decided it was.
The post on The Claims Guide’s X post stated: “Owned a BMW, Citroen, Ford, Peugeot, Volvo, or Jaguar & Land Rover diesel car? Manufacturers are accused of cheating emissions tests […] Over £193 MILLION has been paid. Find out if you qualify”.
The post included an image of black text on a white background that stated: “Diesel Emissions Claims […] Make a claim Drivers can potentially make a diesel emissions claim if they owned or leased a diesel car Claims are expected to [sic] worth up to £10,000 each […] Eligibility is dependent on the exact make and model, so should be checked using the official reg checker” and “Check Your Car In Seconds. Get Up To £10,000 With A Diesel Claim”. The post linked to a page of the The Claims Guide’s website headed “Diesel Emissions Claims”.
The ASA challenged whether the ad misleadingly implied that The Claims Guide was associated or endorsed by the UK Government.
The Claims Guide’s response was that “any implication of association with or endorsement by the UK Government was unintended”.
The ASA upheld the challenge. It decided:
– the image had the same “typography, the black and white colour scheme, and simple layout” as the Government’s website;
– these elements (and others) were “distinctively associated with the GOV.UK website and therefore would give consumers the impression that the company “The Claims Guide” was officially approved, endorsed or authorised by the Government to help consumers make diesel emission claims”;
– this was reinforced by the reference to “the official reg checker”(when there was no such checker).
The advert was therefore banned because it “implied that The Claims Guide was approved, endorsed or authorised by the UK Government, and that was not the case”.
This is a useful and robust decision from the ASA. It ensures the advert cannot be used again by The Claims Guide. But there are many similar adverts on social media, often linked to diesel emissions or motor commissions. Firms who advertise in such a way, or make other misleading claims, may therefore face engagement from the ASA along with their own regulator.
Earlier today, on 11 March 2025, the UK Financial Conduct Authority (the FCA) published a statement on its next steps in its motor finance review. The FCA says:
– If, taking into account the Supreme Court’s forthcoming decision on the appeal from the Court of Appeal’s decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282, it concludes motor finance customers have “lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme“;
– Under a redress scheme, “firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do“;
– The FCA no longer plans to make a further announcement in May 2025. Instead, the FCA will confirm its position “within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward“; and
– The FCA’s next steps on non-discretionary commission arrangements will also be informed by the Supreme Court’s decision.
There are some interesting points from this statement:
– The statutory test under Section 404 of the Financial Services and Markets Act 2000 refers to it appearing to the FCA “that there may have been widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity“. The FCA’s statement that it may (depending on the circumstances) consult on such a scheme is therefore a simple re-statement of part of the test for a consumer redress scheme under the statutory provisions.
– It is unsurprising that the FCA will not make an announcement in May 2025: this seemed inevitable once the lenders were given permission to appeal by the Supreme Court in December 2024.
– There is no mention of the appeal to the Court of Appeal from the High Court’s decision in R (Clydesdale Financial Services Limited) v Financial Ombudsman Service [2024] EWHC 3237 (Admin). This has a ‘hear by’ date of 8 December 2025 and the Court’s consideration of the FCA’s rules and guidance in the Consumer Credit Sourcebook must (it is submitted) be part of the FCA’s wider consideration of whether there has been “widespread or regular failure“.
Earlier today. on 21 November 2024, the UK Financial Conduct Authority (the FCA) published a press release and a consultation paper setting out its proposals for further changes to complaint handling rules for motor finance commission complaints.
In broad terms:
– the FCA proposes to extend its current rules in DISP Appendix 5 to motor finance non-discretionary commission arrangement (or a DCA) commission complaints;
– the FCA is consulting on two proposals meaning there would be a pause for issuing a final response letter on a non-DCA motor commission complaints to either (a) 4 December 2025 (to align with DCA motor commission complaints) or (b) 31 May 2025;
– the FCA says it will set out its next steps on discretionary motor finance commission complaints in May 2025 and proposes to set out its position on non-discretionary motor finance commission complains at the same time (as it believes that the Supreme Court will have made a decision on whether to give permission to appeal in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282 by then); and
– the FCA proposes to extend the time to refer a complaint about a non-DCA motor commission complaint to the Ombudsman Service until the later of 15 months from a final response letter, or 29 July 2026.
The deadline for responding to the consultation is 5 December 2024. It is likely that new rules and guidance will be made shortly afterwards.
On 24 September 2024, the UK Financial Conduct Authority (the FCA) published a press release and Policy Statement 24/11: ‘Extending the temporary changes to handling rules for motor finance complaints’ (PS24/11). PS24/11 effectively implements the changes proposed by Consultation Paper 24/15: ‘Extending the temporary changes to handling rules for motor finance complaints’.
The changes to DISP Appendix 5 come into force 26 September 2024.
The key changes are:
– the pause on the requirement for firms to provide a final response to DCA complaints within 8 weeks, giving complainants the right to go to the Financial Ombudsman (which was due to end on 25 September 2024) will be extended to 4 December 2025 (see DISP App 5.2.1R(2));
– there are new requirements on keeping consumers informed about the pause (see DISP App 5.2.5AR to DISP App 5.2.5CR);
– the timeframe for consumers who receive a final response on relevant complaints to decide whether to refer their complaint to the Financial Ombudsman is extended to 29 July 2026 (at the earliest) (see DISP App 5.2.9R(3)); and
– requirements to maintain and preserve relevant records will remain in place until 11 April 2026 (see DISP App 5.3.1R(2)(b)).
There are some interesting points for firms:
– the FCA makes it clear that PS24/11 is relevant to “motor finance providers” and “motor finance credit brokers, including motor dealers“;
– the FCA’s view is that neither the original pause, nor these changes, “prevent consumers or their representatives from … taking legal action“;
– the ongoing judicial review (which is due to be heard between 15 and 17 October 2024), and the Court of Appeal cases dealing with commissions (where judgment is reserved), are relevant to the FCA’s decision making; and
– because “many motor finance agreements involving DCAs were made, or ended, more than 6 years ago, it is likely that the 3-year rule [on time-barring] will be more relevant for consumers“.
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