FCA motor finance redress: Consumer Voice is right to challenge the FCA. But wrong to expect increased payouts.

Today it emerged that the first - and possibly the only - challenge to the FCA's motor finance redress programme will be from Consumer Voice, which claims to represent consumers and is reported to be funded by fees and contributions from law firms in the claims management industry. 

Consumer Voice argues that the calculation for offering redress is ‘fundamentally flawed and significantly underestimates the true harm suffered’. 

I agree with the first part of that. Instead of measuring the real consumer detriment from any alleged inadequacy of commission disclosure - taking into account the actual specificities of each case (including the costs of the broking service provided in line with FCA rule CONC 4.5.2 which the FCA has virtually ignored throughout this, and other rates the customer might have found in the market at the time outside of the dealership) and making redress based on that, the FCA has created a monster of a theoretical economic model that generates crude figures that are unlikely to match any customer's actual loss. 

As I have covered in previous articles, finding the historical data needed and estimating actual consumer losses should not be as difficult as it sounds. I'm happy to discuss this with firms in the industry.

If Consumer Voice was to succeed in demonstrating the inherent weaknesses of the FCA's approach (noting the odds at this stage are hugely stacked against it, just from the way the legal system for appealing regulatory decisions is designed) and the FCA was then forced to review its approach to calculating redress, I expect in some cases it would be found that the redress currently on the table is too low. But in most cases, I expect the correct redress will be found to be either zero or far lower than the figures currently being proposed.

Should the industry be rooting for Consumer Voice? Oddly, maybe it should.