The UK's financial regulator has snapped back at consumer groups after it was accused of short-changing millions of drivers in the car finance scandal.
Consumer Voice has mounted a challenge against the Financial Conduct Authority's (FCA) compensation scheme, which was announced earlier this year.
The legal challenge questions how the FCA's redress scheme, which will see the average agreement receive £829, was calculated, amid fears that drivers are not receiving a suitable level of compensation.
In total, the redress scheme outlined by the FCA will cost £9.1billion in total, with compensation costs set to hit £7.5billion based on 75 per cent uptake from consumers.
TRENDING
Stories
Videos
Your Say
Consumer Voice announced that it would apply to the Upper Tribunal to review the scheme under section 404D of the Financial Services and Markets Act 2000.
It argues that the FCA should give motorists the opportunity to access a redress scheme that fairly reflects the harm suffered as a result of the misselling scandal.
The group claimed that the redress has been "minimised to protect lenders" in a move that ignores the FCA's "consumer protection objectives".
Alex Neill, co-founder of consumer rights organisation Consumer Voice, said: "We are taking this unprecedented step to challenge the regulator's redress scheme because it doesn't deliver fair or lawful compensation for drivers.
The FCA has snapped back at Consumer Voice after it pledged to appeal the car finance compensation scheme
|GETTY
"We support a redress scheme being put in place, but as it stands, millions of people will be under-compensated, and the lenders involved in this scandal won't be meaningfully held to account.
"The FCA has designed a scheme that leaves ordinary motorists hundreds of pounds per claim out of pocket. That cannot be left unchallenged."
However, the FCA has hit back at these claims, arguing that it is only concerned about getting fair compensation for motorists as quickly as possible.
After announcing the compensation scheme, CEO Nikhil Rathi said firms could begin paying drivers back as soon as possible, but noted that this was an unlikely scenario.
LATEST DEVELOPMENTS
The FCA said the average agreement would receive £829 in compensation in the aftermath of the car finance scandal | PA The FCA has warned any law firm or claims management company (CMC) involved in the challenge against the scheme to consider what is best for their clients.
The regulator called on these companies to write to their clients to explain that they're involved in a challenge, which could lead to a delay in compensation being paid.
It added that law firms and CMCs should give clients the option to exit their contract, noting that they should also waive fees.
In a statement, the FCA added: "Our scheme will put £7.5billion back in people's pockets. Some have already waited over two years for a response to their complaint.
FCA boss Nikhil Rathi praised the redress scheme, noting that it would put money back in the pockets of drivers | GETTY "With pressure on household bills rising, they shouldn’t be made to wait longer. Over 12 million agreements made between 2007 and 2024 are eligible for compensation under the scheme.
"Our analysis shows millions of those did not involve the particularly serious misconduct identified in the case considered by the Supreme Court."
The FCA has previously warned that drivers could lose up to 35 per cent of their compensation when going through a law firm or CMC.