Examining the FCA's £700 motor finance redress scheme and the £10 billion consumer shortfall
The Unanswered Question
The FCA claims to have analysed 31.86 million agreements and drawn conclusions affecting millions of consumers.
But how can this be true when the regulator itself admits that many fields were missing — and when lenders have publicly acknowledged deleting original customer records after six years?
The FCA's statement creates the impression of a forensic review of 31.86 million signed contracts; in reality, it examined computer-generated data tables supplied by lenders, not the actual agreements or the commissions paid.
Despite admitting that "many firms broke laws and regulations," the FCA has rewarded those same firms through a policy that cut consumer redress from £1,250 → £950 → £700, adding £41 billion to the market value of UK banks while removing up to £10 billion from ordinary consumers.
If consumers broke the law, they would be prosecuted and penalised. When banks do, they are compensated by a rising share price.
The Illusion of Analysis
The FCA's consultation CP25/27 suggests exhaustive investigation — but its "agreement-level" data came from anonymised spreadsheets, not authentic credit files.
Each line contained limited variables such as APR, loan amount, and a commission flag.
Many entries lacked a DCA/non-DCA indicator, and 647,728 agreements were recorded as "commission paid but no recorded type."
This is not an audit of legal contracts; it is statistical inference.
The regulator's own admission that "limitations in the data we have spanning such a long period" undermines the credibility of its £700 average.
No court would accept this as evidence of fairness — yet it now dictates compensation for 14.2 million consumers.
How the £700 Was Engineered
The FCA combined a 17 per cent "APR haircut" with a 2.09 per cent interest rate to produce a notional average payout of £700.
These numbers are not based on real files but are policy parameters inserted into a formula.
Change either variable and the result shifts dramatically.
Law-firm and CMC audits of genuine agreements consistently find average recoveries between £1,000 and £1,250, showing the regulator's £700 proxy materially under-values claims.
Where the Model Compresses Value
The FCA's own datasets show:
APR gap larger than 17 per cent
Their econometrics (2019–2021) found DCA APRs 20–24 per cent higher than flat-fee loans, rounded down to 17 per cent for simplicity.
Interest suppressed at 2.09 per cent
Courts and the FOS routinely apply 8 per cent simple interest.
Hybrid averaging halves high-value cases
Section 140A CCA lets a court award the higher of the two remedies, not the mean.
Each assumption removes £200–£400 per consumer. Across 14.2 million agreements, the shortfall exceeds £5–10 billion.
Real-World APRs: Evidence Beyond 17 Per Cent
During 2009–2021, Moneybarn publicly advertised a representative 30.7 per cent APR; mainstream dealer finance (Regal Motors, Way Car, Blue Motor Finance) displayed 19.9 per cent APR; CarFinance247 quoted 19.8–19.9 per cent APR.
Ombudsman decision DRN-4326581 (2024, Miss L v Barclays Partner Finance) cited a 2017 industry average of 17.5 per cent.
These records demonstrate that 17 per cent is below market reality — making £700 an unreliable estimate of consumer loss.
The 2.09 Per Cent Problem
Under section 140A CCA, courts order restitution with interest that restores the claimant to their pre-loss position.
The judicial convention — and the Financial Ombudsman Service standard — is 8 per cent simple interest.
By using 2.09 per cent, the FCA's model eliminates three-quarters of lawful restitution.
A £1,000 claim would yield £800 interest in court or at FOS, but only £200 under the FCA scheme — a £600 loss per claimant, multiplied across millions.
Legal Levers to Challenge Quantum
Courts may reject the FCA's averages where evidence supports higher recovery:
APR differential (Miss L logic)
Compensatory interest
Hybrid vs commission comparison
Data-gap rebuttals
Bank statements, broker rate-cards, and securitisation schedules can evidence higher true APRs.
When lenders rely on averages rather than originals, claimants can invoke "best-evidence" principles — a protection long accepted in PPI and credit-card redress cases.
25% APR gap + 8% interest: £950–£1,150 → £13.5–£16.3 billion
£15.5–20.6bn
Wider unfairness incidence
50–55% files: £15.5–£20.6 billion
The gap is £5–£10 billion — money that rightfully belongs to consumers, not shareholders.
Accountability and Double Standards
The FCA states: "Many firms broke laws and regulations in force at the time."
Yet those firms face no sanction, while consumers are told to accept partial settlements.
When the regulator reduced claim values, bank stocks soared: the sector gained £41 billion in market capitalisation, and Lloyds Bank recorded its largest one-day rise in three years.
If ordinary citizens broke the law, they would face prosecution; the banks are rewarded.
The Path Forward
The FCA's methodology cannot stand unchallenged.
Solicitors, CMCs and consumer groups should:
File Freedom of Information requests for the FCA's data schema and validation methods;
Refer the issue to the Treasury Committee and National Audit Office;
Pursue claims using file-based evidence under section 140A CCA;
Frame the public interest clearly: "Consumers denied full redress by spreadsheet justice."
This is not a technical debate. It is about £10 billion in consumer losses, £41 billion in bank gains, and a regulator that has forgotten who it serves.