Consumer Finance: An Overview

Overview

Consumer finance continues to be one of the most dynamic, unpredictable and legally complex areas of financial services. Over the past year, the volatility in this space has at times outpaced the oil markets, with major case law reversals, regulatory uncertainty and widespread paralysis across both contentious and non-contentious work. Claims farming activity remains high, and innovation continues apace, but the disruption caused by shifting legal precedent has been felt keenly.

The sector continues to require lawyers who sit confidently at the intersection of banking, consumer protection and commercial law. Consumer finance expertise demands more than a black-letter understanding of regulation; it requires litigation foresight, commercial acuity and a strong grasp of how the market and the courts react in real time to judicial and regulatory developments. Whether it is bulk litigation, securitisation deals, product innovation or compliance advice, the importance of specialist legal input has never been more pronounced.

Hot Topics

A year of judicial whiplash

The Johnson motor commission litigation serves as a vivid example of the extraordinary uncertainty in the consumer finance world. The Court of Appeal’s decision in Johnson caused significant market disruption – before being dramatically overturned by the Supreme Court. In the months between those judgments, the sector was frozen. Commission-related litigation was stayed, and the uncertainty proved contagious. Securitisations and structured finance transactions stalled, as firms struggled to value books or assess contingent liabilities. The impact was not confined to legal departments – it was commercial paralysis.

The Supreme Court’s decision in Johnson brought some relief. The judgment was largely welcomed by the industry and allowed many proceedings to resume. However, it left some key questions unanswered, particularly around precisely when and how lenders should disclose commissions and any tipping point to avoid unfair relationships under the Consumer Credit Act 1974 (CCA). The partial clarity has been enough to restart the engine, but with litigation still rumbling, the road ahead remains uncertain.

Financial Conduct Authority redress scheme – and the threat of judicial review

Attention now turns to the Financial Conduct Authority (FCA). Its promised redress scheme for historic commission arrangements is awaited with interest – and unease. There is a real possibility of judicial review, depending on the scope and ambition of the scheme. The House of Lords Financial Services Regulation Committee has put questions to the FCA addressing concerns about the forthcoming redress scheme. Firms will be watching closely to see whether the FCA chooses a targeted and commercially pragmatic route or takes a broader consumer-focused approach that reopens settled ground. This is a regulatory issue that could carry almost as much risk as the underlying litigation.

The battle over group claims

It is unclear whether group litigation in consumer finance has found new momentum. Angel v Black Horse is now the key case to watch – it will determine how future omnibus claims, including commission and payment protection insurance (PPI) litigation, are structured and managed. In the meantime, most attempts at group litigation are stayed. The Abernethy v Barclays case, which bundles together thousands of PPI commission claims, rejected both the request for a group litigation order and the submission that the claims could be disposed if using an omnibus claim form. Related proceedings have been stayed pending the Court of Appeal’s decision in Angel. Whether omnibus claims will become a viable mechanism for consumer credit litigation depends in part on the outcome in Angel, and in part on whether courts are willing to tolerate procedural efficiencies that cut costs for claimants but make litigation less predictable for defendants.

Claims management evolution – Financial Ombudsman Service fees bite

Elsewhere, the impact of new Financial Ombudsman Service (FOS) fees on claims management companies (CMCs) is beginning to surface. The new cost regime has pushed many CMCs to rethink their profit models. There is a noticeable uptick in satellite litigation, for example pre-action disclosure applications – possibly as a potential means of securing leverage or funds early to offset the financial burden of complaint fees. This satellite litigation adds complexity, cost, and delay to an already overburdened system.

A win in green finance

Amidst the turbulence, a recent bright spot for lenders has come from the green finance space. In GDFC v Heaney, the court delivered a favourable decision for the industry, narrowing the scope of lender liability for mis-selling under the ill-fated UK Green Deal. This offers welcome reassurance in a sector where green finance initiatives are expanding rapidly and regulatory scrutiny is high.

Pushing back: Vanquis Bank v TMS Legal

In a bold move, Vanquis Bank has launched a claim in tort for causing loss by unlawful means against a firm of solicitors specialising in bringing financial mis-selling claims. Losses in the form of staff and management costs, FOS fees and lost profits are alleged to have been caused by submitting claims without any due diligence and misrepresenting the merits to the complainants. This marks an assertive new approach by industry players who are increasingly willing to challenge aggressive claims farming through counter-litigation. If successful, it may embolden other lenders to fight back against speculative or poorly founded claims management activity.

Buy now pay later – regulation incoming

The long-anticipated regulation of Buy Now Pay Later (BNPL) products is now firmly on the horizon. Legislation is expected in 2026 to bring BNPL under the Financial Conduct Authority’s remit. The move reflects a broader trend: the expansion of the FCA’s regulatory footprint in retail financial services. As these products become more mainstream, firms will need to ensure their business models, affordability checks and disclosure documents are ready for a regulated environment.

Ongoing CCA reform

Reform of the CCA remains a slow burn. Part 1 of the consultation closed earlier this year, and the industry awaits Part 2. The government’s proposed “lift and shift” approach—recasting the CCA provisions into the Financial Services and Markets Act 2000 and the FCA Handbook model – raises some concerns. As previous reforms have shown, transplanting rules into new frameworks without precision can create interpretative challenges and unintended consequences. Cautious and detailed legislative drafting will be required to ensure consistency, particularly on technical issues.

Conclusion

Consumer finance is a minefield – strategically, procedurally and commercially. The past year has shown that this area can move fast, with seismic consequences. The Johnson saga triggered a sector-wide shutdown and restart; the FCA’s forthcoming redress scheme may have the same effect again. Meanwhile, litigation models continue to evolve, and regulatory scope continues to grow.

Specialists in this area must be ready to navigate bulk litigation, respond to market movements, advise on new product development, and anticipate shifting expectations. Whether on the front lines of a group claim, reviewing a securitisation deal, or defending a business model against CMCs, the need for consumer finance expertise has never been greater.