In recent months, there have been further important developments which impact the motor finance claims landscape. This update summarises the latest position regarding:
- The FCA’s Consumer Redress Scheme;
- Court proceedings and “omnibus” claims;
- The regulatory focus on claimant law firms and claims management companies (CMCs).
1. FCA Consumer Redress Scheme
Background to FCA Scheme
On 30 March 2026, the FCA published its Policy Statement on Motor Finance Consumer Redress Scheme (PS26/3) setting out the terms of a consumer redress scheme under section 404 of the Financial Services and Markets Act 2000.
The Scheme applies to regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024.
Under the Scheme a lender must presume that there was an unfair relationship if a “relevant arrangement” existed and there was inadequate disclosure of that arrangement. The three “relevant arrangements” are (i) discretionary commission arrangements (DCAs), (ii) high commission arrangements, and (iii) tied arrangements (a contractual tie giving a lender exclusivity or a right of first refusal). There is a presumption that disclosure of an arrangement was not adequate unless it can be supported by documentary evidence, the burden of proof being on the lender to show disclosure occurred.
There are a limited number of exceptions and exclusions for cases falling within the Scheme such as: (i) where a DCA, high commission arrangement or tied arrangement featured a total amount of commission below a de minimis threshold; (ii) where the APR on the agreement was 0%; and (iii) in the case of DCAs, where the interest rate selected was the lowest rate of interest that could have been selected by the broker under the DCA.
The presumption of loss and damage arising from any unfairness can also be rebutted where the lender can demonstrate that the consumer could not have obtained a lower APR from another lender with whom the broker had a referral arrangement.
Under the Scheme, compensatory interest will be paid at the rate of Bank of England base rate + 1% per annum. Further, the Scheme adopts a floor on compensatory interest of 3% in any year and, following feedback from the consultation exercise, does not permit consumers to claim they faced higher borrowing costs.
The FCA has been clear that a Scheme of this scale has required judgements to be made to simplify some complex legal and operational issues. Consequently, the FCA recognises not everyone will get everything they would like from the Scheme.
Legal challenges to the Scheme
Legal challenges were filed by one consumer representative group (Consumer Voice) and three separate lenders.
Consumer Voice are challenging the Scheme on four grounds: market integrity; commission repayment; APR adjustment; compensatory interest. Essentially, Consumer Voice argues that the Scheme should be more consumer-friendly in terms of the quantum of redress and interest being paid out.
The three lenders challenge the Scheme on a variety of grounds. Some of these include: the FCA has no power to make rules in respect of agreements entered into prior to 1 April 2014; the Scheme rules are unlawful because they require firms to assume an unfair relationship in circumstances that are inappropriate; the requirement under the Scheme rules that firms presume causation of loss is unlawful; and the Scheme rules are unlawful because they require firms to pay redress that is not reasonably connected to the loss or damage suffered by a consumer.
Partial suspension of the Scheme
Following the first case management hearing in relation to these legal challenges at the end of June 2026, the Upper Tribunal made an order suspending parts of the Scheme.
The partial suspension enables lenders to keep preparing for the Scheme as far as possible. However, firms do not need to undertake work that may be impacted by the issues that are subject to the legal challenge. Accordingly, firms are not required to pay out redress to customers under the Scheme at the current time.
Where customers have made a complaint but are not owed compensation under the Scheme, lenders do need to start writing to such customers to tell them, subject to limited exceptions.
Hearing date for legal challenge
There is a further case management hearing in early October 2026 that is due to decide the scope of expert evidence and disclosure (along with other case management issues). The outcome of the pending applications regarding disclosure and expert evidence will impact on the length of the final hearing. Accordingly, for present purposes the Upper Tribunal has set two separate potential final hearing dates:
- 14 to 18 December 2026 (if 5 days are required); or
- 16 to 26 February 2027 (if 9 days are required).
The hearing date is likely to be confirmed in October 2026.
The timing for a judgment from the Upper Tribunal is uncertain but we can reasonably expect a decision within 6-8 weeks from the end of the hearing. The judgment is expected to confirm whether the FCA is able to proceed with the Scheme in its current form or whether any aspects of the Scheme are unlawful / quashed and need to be revisited.
No Scheme?
The FCA has warned that if the Scheme, or parts of it, were quashed, it would need to carefully consider all options. A substantially revised Scheme would likely require a further consultation, and any resulting rules or guidance could face further lengthy challenge.
The FCA is therefore warning against a central planning assumption that if any parts of the current Scheme are found to be unlawful, there could be no revised Scheme at all. As a result, lenders need to be operationally and financially ready for a compliance-led and supervisory approach to resolve historic liabilities outside of a formal Scheme.
2. Court proceedings & “omnibus” claims
Whilst encouraged to do so to avoid unnecessary fees and charges, customers do not have to take part in the Scheme. They are free to bring their claims via court proceedings instead.
Claims by individual customers have been filed over recent years across the County Courts and outcomes have been mixed.
Following the Court of Appeal decision in Angel ([2026] EWCA Civ 831), handed down on 30 June 2026, claimant law firms may now look to package up claims via so-called “omnibus” claim forms (i.e. filing a single claim form against a lender with multiple named claimants (sometimes thousands)). The Angel decision focussed on CPR rule 7.3 which provides that a claimant "may use a single claim to start all claims which can be conveniently disposed of in the same proceedings". CPR rule 19.1 provides that any number of claimants or defendants may be joined as parties to a claim.
However, unfair relationship claims and the remedies under s.140A-B of the Consumer Credit Act 1974 are highly fact specific making them, on the face of it, less suited to consolidated group litigation.
When considering the “convenience” test under CPR rule 7.3, the Court of Appeal in Angel summarised the following principles:
- Whilst multiple claimants may use a single claim form, the burden of demonstrating convenience is on the claimants.
- The test of convenience requires no elaboration. The word “conveniently” is a simple English word carrying its usual meaning and many matters may be relevant to the question.
- One indication of convenience may be if there are common issues of law and fact. Multi-claimant proceedings will probably satisfy the convenience test if there are common issues which will bind all or most of the claimants, but that is not the only factor.
- A multi-party claim form must be “a” convenient means by which the proceedings may be disposed of, not necessarily “the most” convenient way.
- Disposing of all claims via a single final trial hearing is not required. All claims do not have to reach the same point at the same time.
- The test of convenience has to be considered by reference to the interests of all parties, the court and the court system.
The Court of Appeal was critical of the claimants in (i) failing to provide any particulars regarding individual claims and (ii) putting forward general common issues that “avoided any investigation of any facts”. However, the Court of Appeal refused to set aside the case management decisions of the High Court (also on appeal) in allowing the multi-party claim to progress. In particular, the Court of Appeal considered that the trial of suitably selected lead cases could give rise to a range of findings that could be used to facilitate settlement of some or all of the wider group of claimants as a whole.
The Court of Appeal was keen to stress that the Angel decision was very much a decision on its own facts and, notably, was an “unreliable vehicle for any statement of principle or guidance concerning multi-claimant claims”. It was also an appeal on limited grounds from a case management decision which sets a high bar for any appeal. Therefore, the Court of Appeal faced “real restrictions on this court’s room for manoeuvre” in terms of the decisions that it could arrive at.
If claimant law firms decide to persuade claimants to opt out of the Scheme in favour of pursuing an omnibus claim via the courts, the claimant law firms will need to properly advise their clients as to the merits of such an approach and claimants will continue to have the burden of demonstrating that the “convenience” test is met by reference to the individual claims that make up the multi-party claim form.
As to the future for “omnibus” claims, the Court of Appeal noted (i) that CPR rule 7.3 was well worth reconsideration by the Civil Procedure Rule Committee; and (ii) it would be useful for HM Courts & Tribunals Service to keep a record of fee revenue being lost as a result of multiple claims being brought via a single claim form (thereby incurring a single fee) when compared to court fees that would have been received if individual claimants had to file individual claim forms, as the effect on court resources is a relevant factor in any test of convenience under CPR rule 7.3.
Accordingly, it is very unlikely that this Court of Appeal decision will be the last word in so-called “omnibus” claims. Not least as there are real questions of policy should this be adopted as a mass litigation process – whether in motor finance claims or other low value, high volume claims (especially where alternative schemes exist).
3. Regulatory focus on claimant law firms & CMCs
Motor finance claims have also put the spotlight on some of the behaviours of some CMCs and law firms when pursuing high volume consumer claims which has led to a multi-agency response.
Joint regulatory taskforce
A joint regulatory taskforce has been set up to tackle the poor handling of motor finance claims by some CMCs and law firms. The relevant regulators are the FCA, the SRA, the Information Commissioner's Office and the Advertising Standards Authority.
By the end of June 2026, 170 misleading car finance claims adverts had been removed or amended, bringing the total up to 1,200 since January 2024.
The FCA also agreed to voluntary requirements (VREQs) with 2 firms, securing agreement that they would stop or change their marketing activities. This brings the total number of VREQs to 12 in relation to a range of motor finance claims activities over the last 12 months.
Alongside this, the Advertising Standards Authority has launched investigations into various motor finance claims adverts placed by law firms. It is scrutinising a range of issues including clarity around fees, the ability to claim for free via other routes, potentially exaggerated compensation amounts and consumers being potentially misled by 'free checker' tools.
Claims Management Market Study
CMCs are regulated by the FCA whereas claimant law firms are regulated by the SRA. The FCA has had concerns regarding the following practices (many of which have been identified in the context of motor finance claims):
- Aggressive marketing leading to nuisance complaints.
- Misleading or unclear advertising, especially in relation to mass claims activity where the use of ‘free check’ tools is prevalent.
- Weak controls over customer acquisition and the use of third-party lead generators, especially in relation to mass claims activity where many consumers are now represented by more than one representative for the same claim.
- The progression of high volumes of speculative or weak claims, with limited claim-by-claim assessment.
- Persistent weaknesses in consumer understanding around fees, likelihood of success and alternative routes to redress.
- Lack of disclosure about potential conflicts of interest.
- Concerns about operational resilience and integrity and use of personal data.
As such, in May 2026, the FCA published Terms of Reference for its Claims Management Market Study. The Market Study will examine the provision of claims management services, including:
- Lead generation: Services provided by lead generators that involve the seeking out, referrals and identification of claims or potential claims.
- Claims management: Services for consumers that involve advice, investigation or representation (including legal representation) in relation to a claim.
From now until December 2026, the FCA will gather information and evidence from stakeholders. This will include a Request for Information being issued to firms.
The FCA expects to share early findings on key themes in the Terms of Reference by the end of December 2026.
The SRA (which, as above, regulates law firms as opposed to CMCs) has said that it will be working closely with the FCA in relation to the Market Study.
FCA Advertising Campaign
The FCA has additionally launched a national advertising campaign starting 27 July 2026 to encourage motor finance customers to complain directly to their lender. The campaign, which will roll out across TV, radio, print and social media, will signpost to free FCA resources including a template complaint letter on the FCA’s website.
Summary
In summary:
- FCA Consumer Redress Scheme: The FCA is keen to implement its Scheme as soon as possible. However, with pending legal challenges from both the consumer and lender side, the Upper Tribunal is unlikely to determine these challenges until Q1 2027 at the earliest. If material parts of the Scheme are quashed by the Upper Tribunal, there remains the possibility that the FCA will decide to abandon the Scheme approach altogether. However, given the time and effort put into developing the Scheme, the FCA will be keen to avoid this outcome if at all possible.
- Court proceedings: There is now a series of appellant court rulings on the substantive law around motor finance commission claims and, most recently, a procedural decision regarding “omnibus” claims. If claimant law firms are to now pursue a strategy of convincing claimants to ignore the Scheme and join an omnibus claim, law firms will need to advise customers on the merits of such an approach and claimants will continue to have the burden of demonstrating that the “convenience” test is met by reference to the individual claims that make up the multi-party claim form.
- Regulatory action: The joint regulatory taskforce is continuing to take immediate action against claimant law firms and CMCs in the context of motor finance claims to crack down on poor behaviours. The ongoing FCA Claims Management Market Study is likely to introduce further reforms for the mid-long term in terms of CMC activity across motor finance and other mass consumer claims with the SRA monitoring findings closely in the context of their regulation of claimant law firms that are active in bringing mass consumer claims.
There will continue to be important ongoing developments in relation to each of the above areas through the second half of 2026 and into 2027.
Article co-authored by Jonathan Wright, Trainee Solicitor
