Letter 1/25 Sep 2025 16:23
I followed SG0912’s great initiative with a letter based 100% on Knots observations:
Dear Lord Forsyth,
Re: FCA Motor Finance Redress Scheme – Concerns over Legal Basis and Market Impact
I am writing to support the Committee’s scrutiny of the FCA’s proposed industry-wide redress scheme in motor finance, and to highlight several areas where the FCA’s current approach appears to run counter to both established law and sound regulatory practice.
1. Supreme Court Ruling: Fact-Specific Unfairness
The Supreme Court’s decision in Hopcraft, Johnson and Wrench (August 2025) made clear that:
* There is no fiduciary duty owed by brokers.
* Non-disclosure of commission, even at high levels, does not in itself make a relationship unfair.
* Unfairness is a fact-sensitive test under s.140A CCA, to be assessed on the “totality” of circumstances.
The FCA’s framing suggests systemic liability can be imposed across the industry regardless of fact-specific differences. This runs directly against the Supreme Court’s position.
2. Limitation Periods and “Deliberate Concealment”
The FCA relies on Canada Square v Potter (2023) to extend liability back to 2007 under s.32(1)(b) of the Limitation Act. But that judgment was fact-specific to PPI, where commission was entirely hidden within a bundled product. Motor finance is different:
* Since 2010, OFT guidance (and later FCA CONC rules) made commission disclosure possible.
* Contracts often included wording that commission “may” be paid, undermining any allegation of deliberate concealment.
* The Supreme Court in Johnson explicitly noted that “inadequate disclosure” is not equivalent to “deliberate concealment.”
The FCA’s attempt to stretch Potter into motor finance therefore appears unsound.
3. Conflicting with FCA’s Own Rules
CONC 4.5.4R only required disclosure of the amount of commission if a consumer requested it. This sits uneasily with the FCA’s current stance that any “inadequate” disclosure equals concealment. The FCA cannot retroactively apply today’s standards to agreements struck under the rules in force at the time.
4. Section 404 FSMA – Statutory Limits
Section 404 requires that any redress scheme mirror what a court would have awarded. Yet the FCA’s August 4th letter contemplates compensating consumers even where records exist to show no unfairness occurred. That would be inconsistent with s.404(1)(b) and open to challenge by way of judicial review.
5. Administrative Costs and Proportionality
The FCA itself has admitted potential “several billion” in administrative costs. To impose disproportionate costs — particularly where courts would not have awarded compensation — is contrary to the proportionality principle and risks creating a “redress bureaucracy” rather than consumer justice.
6. Political and Market Stability Risks
The FCA’s rushed announcement (just two days after the Supreme Court ruling, abandoning its ea
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