As the Financial Conduct Authority (FCA) unveils its long-awaited multi-billion-pound redress scheme for mis-sold car finance, the solicitor who sparked the whole process has warned drivers that they are being hugely shortchanged for a second time.
The FCA’s redress scheme follows years of legal scrutiny into hidden commissions in car finance agreements. This scrutiny was driven in large part by the Supreme Court victory of Marcus Johnson against FirstRand Bank.
That case, led by Kevin Durkin, Director of West-Yorkshire-based HD Law, established that such agreements could create an ‘unfair relationship’ between lender and borrower - a legal principle now underpinning the FCA’s intervention.
Durkin remains the only lawyer in the UK to have successfully taken a car finance mis-selling case to the Supreme Court and won.
He said: “We're extremely disappointed. We were pessimistic, but this falls way short of what consumers should be entitled to in order to receive fair compensation.
“When the Supreme Court decision was released, there was talk of an industry claim value overall of £30billion. They've chipped and chipped and chipped and chipped away. It's taken that much of a haircut. It's basically a number two crew cut.
“Not only that, the scheme is only going to be running for about 18 months. They want it all wrapped up by the end of 2027. It feels like a smash and grab.
“It's quite breathtaking really now we're digesting it.
He added that the average payment being announced as £829 per agreement was a “smoke and mirror” tactic, and described it like “putting lipstick on a pig.”
He added: “If any consumer were to go through the courts, the likely award will be the return of the commission plus interest.
“The Johnson ruling needs to be applied through the courts. It's a very clear and unambiguous judgment - a very reasoned decision from the Supreme Court. And that's the default position that consumers should expect if they have got a case.”
He added that the FCA’s scheme systematically under-compensates consumers: “The FCA’s scheme is the path of least resistance for the banks. While it offers a simple route to some money, it doesn’t reflect the true scale of the ‘unfair relationship’ the Supreme Court identified in the Johnson case.
“In that case, the commission was a staggering 55% of the credit charge. That level of distortion simply isn’t captured in a one-size-fits-all redress model.
“Our firm has averaged payouts of more than £1,800 from the cases that we have won - we would not take a case if the consumer would be better off going through the FCA scheme.
“The banks have set aside billions because they know the legal precedent we established is iron-clad. By steering consumers away from legal advice, the regulator risks helping lenders cap their liability at the consumer’s expense.”
While the FCA scheme may suit some vehicle-owners, Durkin emphasises that it won’t deliver fair outcomes for everyone:
Durkin continued: “Yes, many consumers may be content with £829. But a significant number could be entitled to far more and they won’t know unless they check. The scheme offers convenience but convenience is definitely not fair value.”