8:44 am, August 13, 2025
Car dealers do not need to put money aside to repay customers who were mis-sold motor finance as part of any FCA redress scheme.
That is according to automotive legal experts at Lawgistics, who say that any bill will likely be funded by lenders.
John McDougall , legal advisor at Lawgistics Ltd, appeared on the most recent episode of the Car Dealer Podcast, where talk soon turned to the ongoing state of car finance.
Following the Supreme Court’s landmark ruling earlier this month, it had been hoped that large scale payouts to customers would be avoided.
However, within days, the FCA announced a consultation over a redress scheme, which could end up costing as much as £18bn.
The situation has led to questions being raised by the House of Lords, with dealers left fearing that they may have to foot part of the bill.
However, speaking on the Podcast, McDougall was quick to try and allay concerns.
When asked if dealers should be putting money aside to fund any redress scheme, he replied: ‘No. There will be some dealers out there that if the lenders were then going to go, “right, you’re paying for this”, the doors will be shut within minutes.
‘You look at the business models of some car dealers, especially used car supermarkets, the whole business model is on cheap cars but we earn the money on the finance.
‘We’re talking millions, millions of pounds and that was the business model. The point was you went there because you could buy your car for two grand cheaper than the main dealer.’
‘Tell the FCA what you think’
In the aftermath of the Supreme Court verdict, the FCA announced it was consulting on the terms of any redress scheme.
Concerns have already been raised about the timescale of any scheme, with the FCA currently keen to accept claims dating all the way back to 2007.
The Finance and Leasing Association has already said that dealers’ records will be ‘patchy at best’ leading to questions being asked about the fairness of any scheme.
The consultation is open to any dealers who are FCA regulated and McDougall says that anyone with strong opinions should send them to the regulator.
He added: ‘The consultation is in October and I would suggest that if anybody’s got any strong views on it, that’s the whole point of the consultation. They’re all credit brokers, they’re FCA registered, therefore, tell the FCA what you think.
‘Bombard them with your thoughts because that’s ultimately the whole idea of the consultation is they want input.
‘They’ll get input from the big boys – the lenders will be the ones driving this because ultimately they’re the ones going to be paying out, but if you think, “well, I’m not happy about this” then tell them because that’s the whole point of a consultation.
‘Supposedly they’ve not made their decision. They’ve not made the decision that it’s going to be £950 quid. They haven’t made that decision, they’re just setting that to see if you agree with those [figures].
‘They’ll come out with their ideas and then they’ll want feedback. I would suggest that especially the bigger players – the car supermarkets – just write in. You are allowed to do that and that’s well within your remit.’
What next?
The current scandal has been the most publicised consumer rights crisis since PPI, when £38bn was paid in redress to customers for mis-sold policies.
McDougall says that the end of that scandal, teamed with Covid, was partially responsible for the FCA going so hard on car finance.
He has now predicted that the watchdog will now move on to a different sector, leaving the motor finance to try and recover from what has been a tumultuous period.
Asked what the FCA will do next, he told host James Baggott: ‘They’ll move on to something else.
‘This was convenient, PPI had just finished and you had Covid. Historically, they’re very much into your airfare cancellations and all that sort of stuff but because Covid affected them – because obviously nobody was traveling anywhere – there was no redress or claim situation going on so they sort of moved into this.
‘They basically had an open goal to say “Here we go, here’s another scandal” and that’s how it was delivered by the FCA: “Millions have been mis-sold”.
All people looked at was the headline and we’re the best one in the world, that’s the FCA’s job. It’s all about headlines but when you read the nitty-gritty actually, they took a small sample size and have come up with this number and they think that equates to these millions of pounds.
‘That unfortunately is where we’re at now.’
You can listen to the full episode on Spotify or wherever you get your podcasts.
