Barings Law has opened a second front in the motor finance redress dispute, telling clients they may hold separate affordability claims against lenders that sit outside the Financial Conduct Authority’s compensation scheme.
The north west firm, which represents 90,000 drivers nationwide, said some customers were approved for vehicle loans they were never realistically able to sustain, giving rise to claims distinct from those over undisclosed commissions.
The FCA created its redress scheme after the Supreme Court’s ruling last year on commission disclosure, and estimates average payouts of £829 per finance agreement. Barings argues that figure understates the value available to many consumers, pointing to affordability claims currently securing average damages of approximately £4,800, with some settlements exceeding £22,000.
The firm’s position is that these affordability claims have received little public attention from the regulator and fall outside the scheme entirely, meaning consumers pursuing only the standard redress route could be leaving a larger claim unexplored.
The FCA has urged customers to avoid using claims management companies and law firms when pursuing redress, a position Barings shows no sign of accepting.
The regulator has separately raised concerns about conduct across the claims sector, citing unwanted marketing texts and emails, misleading advertisements, and consumers signed up to claims through “free compensation checker” prompts on social media without intending to pursue a claim at that stage. It has published a template letter allowing customers to complain directly to firms engaged in such practices.
The divergence between the FCA’s scheme and parallel affordability claims raises a client communication issue as much as a legal one for solicitors and claims teams advising in this space: firms need to be clear with consumers about which avenue applies to their circumstances, and why redress under one route does not necessarily preclude a claim under the other.
In-house counsel at lenders face a corresponding exposure question, since affordability claims open a line of liability that sits outside the scope and timetable of the FCA scheme entirely.
That timetable is itself under strain. Legal challenges from both claims representatives and lenders have delayed the scheme, and the FCA’s chief executive told the Treasury Committee that payments are increasingly unlikely before 2027.
For firms managing motor finance caseloads, the practical implication is a longer period in which affordability claims and FCA redress run in parallel, with case strategy needing to account for both the disputed timeline and the prospect of further regulatory intervention into claims handling practices across the sector.