According to Kevin Durkin, one of the key legal architects behind the judgment that reshaped the UK motor finance landscape, Judicial Review means the FCA's motor finance redress scheme may yet lead to more litigation, rather than less.

When the Financial Conduct Authority announced its proposed motor finance redress scheme, it had a clear objective: provide consumers with a structured route to compensation while avoiding years of individual litigation. It was a pragmatic response to one of the largest consumer finance scandals in recent history.

Ironically, the scheme designed to reduce litigation has itself become the subject of litigation. Multiple Judicial Review challenges mean implementation is now expected to be delayed until at least November 2026, and the scheme may yet be amended significantly or even struck down altogether.

That leaves consumers, lenders and legal professionals in something of a legal no-man's land, with no certainty about how compensation will ultimately be delivered.

Having represented Marcus Johnson in the Supreme Court case against FirstRand Bank, which established an important precedent on unfair relationships arising from undisclosed commission arrangements, I have seen first-hand how these issues have evolved. What began as an individual consumer claim has become a regulatory challenge involving billions of pounds and potentially millions of finance agreements.

Impact of Judicial Review

Judicial Review is an essential safeguard. Regulators, like any public body, must act within the law, and those affected by their decisions are entitled to challenge them. That process should not be viewed as an obstacle to justice but as part of ensuring regulatory powers are exercised lawfully.

The practical consequences, however, are significant. Consumers have already waited years for clarity. Many entered finance agreements long before investigations into commission practices gathered pace.

Since then there have been regulatory reviews, major court proceedings and a landmark Supreme Court judgment. Yet many still have little idea when, or how, their claims will finally be resolved.

Realistic outcomes

There are now three realistic outcomes. The FCA's scheme could proceed broadly unchanged, albeit after further delay. It could be substantially revised, requiring further consultation and potentially pushing compensation into 2028 or beyond. Or it could be struck down entirely, leaving no centralised redress scheme at all.

If that happens, compensation is likely to return to being complaint and litigation-led. There would be no obligation on lenders to proactively assess claims or make payments through a regulatory scheme. Consumers would instead have to pursue complaints individually and, where necessary, bring legal proceedings.

For many consumers, specialist legal representation is likely to offer the clearest and most effective path to redress, particularly where complex legal and evidential issues arise.

That is why it is premature to suggest consumers will not need solicitors. If the FCA scheme is abandoned or significantly delayed, litigation may once again become the principal route to securing compensation.

For many consumers, specialist legal representation is likely to offer the clearest and most effective path to redress, particularly where complex legal and evidential issues arise.

The uncertainty extends beyond consumers. Financial institutions are attempting to quantify potential liabilities while the legal framework remains unsettled. Advisers are being asked to provide guidance while key elements of the proposed scheme remain under challenge. Meanwhile, every month of delay means lenders continue to retain funds that may ultimately be payable in compensation.

The FCA's original aim was to create consistency and avoid an overwhelming volume of individual claims. The longer implementation is postponed, the greater the risk that confidence in that objective begins to erode.

Regulation and litigation

It is also important to recognise the different roles of the courts and the regulator. The Supreme Court's role in cases such as Johnson was to determine legal principles concerning fairness, disclosure and consumer protection. A regulatory redress scheme serves a different purpose: creating a practical framework capable of resolving large numbers of claims efficiently.

That is not a criticism of the FCA. Large-scale consumer redress inevitably requires practical solutions.

However, regulation and litigation perform different functions. One administers outcomes across an entire market; the other determines individual legal rights. Maintaining confidence in both systems requires recognising those distinctions.

It is important to recognise the different roles of the courts and the regulator.

The current Judicial Reviews should not simply be viewed as attempts to frustrate compensation. They raise legitimate questions about whether the proposed scheme is legally sound and properly reflects the principles established by the courts. Equally, claimant solicitors are seeking to ensure there remains an effective and legally robust pathway to justice for millions of motorists.

Need for certainty

Whatever the outcome, consumers and businesses alike need certainty. Consumers deserve a process that delivers fair outcomes within a reasonable timeframe, while businesses require a lawful framework that enables liabilities to be assessed with confidence.

The motor finance litigation has already reshaped consumer credit law. The challenge now is ensuring the next stage delivers the clarity that has so far proved elusive.

After years of investigations, regulatory intervention and landmark litigation, the focus should now be on achieving resolution rather than allowing uncertainty to become the defining feature of one of the UK's most significant consumer finance disputes.

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