Martin Lewis challenges FCA boss: Why the poor interest rate on car finance mis-selling redress?

MSE_Abby

If you're due a car-finance mis-selling payout under the financial regulator's mass redress scheme, you're set to get interest based on the base rate plus 1% – far less than what you could have got from savings. MoneySavingExpert.com founder Martin Lewis says this rate is "too low", and challenges the boss of the regulator in the latest episode of ITV's The Martin Lewis Money Show Live...

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'Martin Lewis challenges financial regulator boss: Why the poor interest rate on car finance mis-selling redress?'

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eskbanker

MSE_Abby said:

If you're due a car-finance mis-selling payout under the financial regulator's mass redress scheme, you're set to get interest based on the base rate plus 1% – far less than what you could have got from savings. MoneySavingExpert.com founder Martin Lewis says this rate is "too low", and challenges the boss of the regulator in the latest episode of ITV's The Martin Lewis Money Show Live...

There are undoubtedly various better savings rates available for those able and willing to shop around and transfer regularly, but base rate plus 1% is still a pretty high benchmark - if he feels that it's unrealistically low, why is there only one (non-regular saver) product above 5% at https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/ ?

subjecttocontract

That statement isn't true. It depends on what period the car loan was for. Interest rates were very, very low for a long period of time and not at the current interest rates avai!able.

Grumpy_chap

subjecttocontract said:

That statement isn't true. It depends on what period the car loan was for. Interest rates were very, very low for a long period of time and not at the current interest rates avai!able.

A calculation on "base rate plus 1%" will cover the fluctuations in rates over the period that the redress covers.

I also consider that £base rate plus 1%" is quite a good rate for simple savings.

Maybe there are others that thing the rate should be whatever the loan rate was.

subjecttocontract

Grumpy_chap said:

subjecttocontract said:

That statement isn't true. It depends on what period the car loan was for. Interest rates were very, very low for a long period of time and not at the current interest rates avai!able.

A calculation on "base rate plus 1%" will cover the fluctuations in rates over the period that the redress covers.

I also consider that £base rate plus 1%" is quite a good rate for simple savings.

Maybe there are others that thing the rate should be whatever the loan rate was.

Yes I agree base +1% is ok. From 2007 we had a long period of low interest rates.
I think what some others are really asking is why has it not been set at the higher commercial rate.

So, does anyone know how the interest will be calculated ?
We know they will add interest.
Interest is bank base + 1% = 5%......is that for every year since the loan was taken or a single payment ?

Ectophile

I think Martin Lewis has lost touch with reality.  An ordinary bank savings account isn't going to be better than 1% above BoE base rate.

(Disclosure: I own shares in one of the large UK banks)

subjecttocontract

Agreed but commercial rates are higher and one of the questions was why haven't they applied commercial rates. The last time I received compensation the interest paid was at 8%. The matter hasn't been finalised its still under consultation so the opportunity to change it still remains.

eskbanker

subjecttocontract said:

Agreed but commercial rates are higher and one of the questions was why haven't they applied commercial rates. The last time I received compensation the interest paid was at 8%. The matter hasn't been finalised its still under consultation so the opportunity to change it still remains.

But as referred to in the MSE piece, the FCA and FOS are acting together on this, and issued a joint Call for Input prior to the FOS consultation earlier this year, which resulted in the base rate plus 1% being adopted for its compensation interest, as a conscious decision to move away from the flat 8% statutory figure historically used for decades, which is obviously some way off more recent norms, although the 8% can still be applied in certain scenarios:

We have consulted on a range of interest options after feedback from our joint Call for Input with the Financial Conduct Authority (FCA) suggested the rate should be reviewed. The previous rate of 8% had remained unchanged for nearly 25 years despite significant shifts in the economic landscape and interest rate environment.

[...]

There are different types of interest businesses can be directed to pay, and one of these compensates consumers for being “deprived” of money – that is, not having it available to use – such as where an insurance claim has been wrongly turned down. This is in addition to the compensation for the actual money lost. Acting on feedback from stakeholders, this rate will change to track the Bank of England’s base (average) rate +1% to better reflect actual economic conditions and the cost to consumers. The move aims to strike a balance between simplicity, fairness and proportionality.

We can also direct a business to pay 8% interest if it doesn’t pay compensation on time. Responding to feedback from the consultation about the need to ensure firms do not delay payment, this rate will remain in place.

https://www.financial-ombudsman.org.uk/news/financial-ombudsman-service-announces-change-compensation-interest-levels

Unsurprisingly, consumers and industry bodies preferred different options in that consultation!

There was a significant preference for Option C: Tracker rate (average rate) plus 1%, which was our initial recommended option. This option gained strong support from financial businesses and trade bodies, but no support from consumer groups. It was seen as the fairest and most proportionate option by those who favoured it, stating that the rate better reflects actual economic conditions and cost to consumers.

[...]

Conversely, Option A (fixed 8% - no change) was the preferred choice primarily among consumers, consumer groups and professional representatives. These respondents valued the simplicity and predictability of a fixed rate, its alignment with post-judgement courtawarded interest, and its role as a deterrent to poor conduct. Some noted that a consumer should not be disadvantaged by choosing to bring their complaint to the Financial Ombudsman Service rather than the courts, and that the relatively high 8% rate compensates for the lack of compounding and long delays in complaint resolution. They argued changing this rate could disproportionately affect low-income households.

https://www.financial-ombudsman.org.uk/files/324645/Financial-Ombudsman-Service-Policy-Statement-interest-on-compensation-awards.pdf

dumpster_fire2025

Ectophile said:

I think Martin Lewis has lost touch with reality.  An ordinary bank savings account isn't going to be better than 1% above BoE base rate.

(Disclosure: I own shares in one of the large UK banks)

He's been like that for a long time.

He got famous through the bank charges reclaiming scam that he didn't even win, and since then his entire focus has been jumping on every bandwagon hoping that lightning will strike twice.

It hasn't. In 18 or so years he's backed dud after dud after dud.

I'm all for consumer rights but he isn't a consumer rights champion, he's a "whatever will get Martin Lewis richer champion."

subjecttocontract

dumpster_fire2025 said:

Ectophile said:

I think Martin Lewis has lost touch with reality.  An ordinary bank savings account isn't going to be better than 1% above BoE base rate.

(Disclosure: I own shares in one of the large UK banks

I'm all for consumer rights but he isn't a consumer rights champion, he's a "whatever will get Martin Lewis richer champion."

Well anything above base +1% will make me richer and If he can help achieve it it'll make him my champion. 😁😁

eskbanker

dumpster_fire2025 said:

Ectophile said:

I think Martin Lewis has lost touch with reality.  An ordinary bank savings account isn't going to be better than 1% above BoE base rate.

(Disclosure: I own shares in one of the large UK banks)

He's been like that for a long time.

He got famous through the bank charges reclaiming scam that he didn't even win, and since then his entire focus has been jumping on every bandwagon hoping that lightning will strike twice.

It hasn't. In 18 or so years he's backed dud after dud after dud.

I'm all for consumer rights but he isn't a consumer rights champion, he's a "whatever will get Martin Lewis richer champion."

I think that's harsh - he's undoubtedly become very wealthy over the years but I don't see any evidence that he picks and chooses his battles for personal gain, especially in the context of the eight-figure sum he's ploughed back into charities:

https://blog.moneysavingexpert.com/2025/01/martin-lewis-charity-fund-2025-update--what-happened-to-my-p10m-/

I'm not necessarily trying to argue that he can point to a list of actual tangible achievements resulting from his relentless campaigning but wouldn't be surprised if someone could, and to me there's no doubt that he's raised awareness of many personal finance issues in a way that's broadly positive.