The boss of the UK’s financial regulator is accused of threatening a consumer group with “adverse consequences” if it blocked a £۹.۱bn compensation scheme meant to settle the motor finance scandal.
Legal documents reviewed by the Guardian said the alleged comments by the Financial Conduct Authority (FCA) chief executive, Nikhil Rathi, amounted to “an inappropriate intervention by a public official”.
The threat is said to have taken place during a Microsoft Teams call with the directors of Consumer Voice (CV) on ۲۷ April, hours before the deadline to file legal challenges against the FCA’s proposed redress scheme for those missold car loans.
Rathi warned that the City regulator would be “unable to collaborate” with Consumer Voice if it took legal action, “suggesting adverse consequences for CV’s future engagement with the FCA and adverse press briefings against it”, the filings said.
“The implication was clear: the FCA’s willingness to engage constructively with CV was contingent on CV not challenging the scheme, and would give way to hostility if it did,” the documents claimed.
Up until that point, the FCA had treated Consumer Voice as a “trusted expert consumer body”, the filings said. But once the group decided to challenge the scheme, “the FCA changed its position … now the FCA seeks to denigrate CV’s activities and motives in bringing this application”.
Rathi also allegedly claimed that their potential legal challenge was the “biggest risk to the scheme” and that plans to get money to millions of victims by this Christmas would fail if directors followed through with their plans.
The filings say it was not disclosed that three specialist lenders were also planning to challenge the scheme, only that the FCA had been “engaging with the banks”, who, over the previous weekend, decided not to challenge the payout plan.
The episode marks a fresh controversy in the long-running saga surrounding mis-sold UK car loans, which prompted a contentious intervention by former chancellor Rachel Reeves last year, following intense lobbying by big banks. Lenders have been arguing that a large compensation bill would risk spooking investors and causing long-lasting economic damage to the UK.
The documents were filed at the UK’s upper tribunal, as part of the wider legal challenge against the terms of the FCA’s compensation scheme. Consumer Voice and the specialist lenders – Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance – are challenging the scheme on different grounds.
Consumer Voice, founded by former Which? staffers Nikki Stopford and Alex Neill in ۲۰۲۳, is the only group arguing for bigger compensation for drivers who were overcharged as a result of lenders paying out commission to car dealerships between ۲۰۰۷ and ۲۰۲۴.
They say the scheme is low-balling consumers – offering average payouts of £۸۳۰ per mis-sold loan – and is putting the interests of profit-making lenders, who fear big bills, ahead of the interests of consumers it is meant to protect.
The FCA has since tried to get the claim by Consumer Voice thrown out of court by alleging that its co-founders have not been transparent about their funding and potential conflicts of interest.
Last month, legal documents lodged by the regulator suggested Consumer Voice was not being honest about its business model and relationship with its lawyers at Courmacs Legal. Both firms, “operate for profit in the sphere of claims management”, the FCA said, adding that Courmacs had previously hired Consumer Voice to conduct consumer research on its behalf. The consumer group “therefore has commercial incentives of its own”.
Consumer Voice says it partners with law firms with an aim to help consumers “get back money they’re owed from rule-breaking companies”. It has promoted claims against the likes of Amazon, Facebook, Mastercard, Apple iCloud, and Sony PlayStation, and makes money by doing communications work for law firms to raise awareness of their claims. It also receives a commission when its members join one of the law firms’ cases, according to its website.
Courmacs, based in Blackburn, says it is providing pro bono services in the case against the FCA. Ultimately, larger payouts for consumers will boost Courmacs’ earnings, with the firm taking up to ۳۰% of client settlements.
A spokesperson for the FCA said “we don’t recognise the way this conversation has been characterised”, adding that officials had spoken to a range of parties, including lenders and claims firms ahead of the deadline.
“It was important to explain the implications for consumers and that we would defend the scheme robustly as the best way of getting compensation paid,” the FCA said. “We were also clear that we would be upfront with consumers about why expected compensation would be delayed.”
The FCA also said they did not know about the other challenges by specialist lenders until after the call.
The regulator added that its staff had continued to engage with Consumer Voice since the call, including by discussing a voluntary charter to address concerns that consumers have been signed up to multiple representatives on single claims.
“We will respond fully to Consumer Voice and Courmacs Legal in our court filings.”
Consumer Voice co-founder Alex Neill said: “We remain resolute and confident in our challenge on behalf of millions of consumers who are being short-changed by the redress scheme.”
