Banks Push Back Against the FCA’s Car Finance Redress — But Can They Really Stop It?
We explore the uphill battle that lenders face against the forthcoming redress scheme.
Santander UK has made headlines after calling on the government to step in over the Financial Conduct Authority’s (FCA) car finance redress scheme. The bank claims the regulator’s plan could shake up the credit market and even harm the wider economy.
It’s a bold move, and it shows just how nervous the industry has become. The FCA’s consultation could trigger one of the biggest consumer compensation exercises in recent memory, with potential costs of £9–18 billion across the banking sector. In short, this is a financial storm waiting to break.
What’s All the Fuss About?
The issue goes back to the way many car finance deals were arranged. For years, some dealerships and brokers were paid discretionary commissions, meaning they earned more if they pushed customers into higher interest rates.
The FCA sees this as a clear conflict of interest and wants to fix it through a standardised compensation framework. The banks, meanwhile, insist the plan is overreaching. They argue it’s unfair, too expensive, and may restrict access to car loans. Santander even warned that it could hurt jobs and growth if the scheme goes ahead unchanged.
Why the Banks Probably Won’t Win
Despite the noise, the odds aren’t looking good for the lenders. Here’s why.
1. The Law and the Regulator Are on the Consumers’ Side
The courts have already criticised these commission structures, calling them unfair and opaque. The FCA is following that lead and has made it clear that a compensation scheme is the simplest, fairest way to settle old liabilities. Once the regulator takes that stance, it’s almost impossible to walk it back.
2. The Banks Don’t Have Much to Go On
Even if they wanted to challenge the FCA, they’re operating in the dark. The consultation hasn’t yet nailed down key details like the timeframe for claims or how payouts will be calculated. Without clear rules to dispute, the banks’ legal arguments are weak from the start.
3. Public and Political Pressure Is Against Them
Let’s face it: after the PPI scandal, the public has little sympathy left for big lenders claiming to be unfairly treated. Politicians and the press are firmly on the consumers’ side. Any attempt to delay or block compensation will only make the banks look defensive and out of touch.
4. The Market Needed Reform Anyway
Over 90% of new cars in the UK were financed through dealership deals, most with complex, barely understood terms. The system was long overdue for reform. The FCA’s plan is about forcing transparency into a market that badly needs it.
5. History Doesn’t Favour the Banks
From pensions to endowments to PPI, one pattern keeps repeating: when regulators decide consumers were misled, redress always follows. Banks might delay the process, but they rarely change the outcome.
The Bigger Picture
It’s clear that banks are trying to limit their exposure, but the chances of stopping the FCA’s redress scheme are slim. The legal precedent, the political climate, and the regulator’s determination all point in the same direction: large-scale compensation.
For drivers who financed a car between 2007 and 2024, this could mean real money back. If your agreement involved a dealership or broker, it’s worth checking whether it falls within the FCA’s scope.
Check If You Could Be Owed Money
If you think your car finance deal might have included one of these hidden commissions, don’t wait for the banks to decide your fate. Use our eligibility checker to see if you might qualify for compensation. It only takes a few minutes, and it could be the most worthwhile thing you do today.
