Four legal challenges now stand against the £9.1bn compensation scheme the Financial Conduct Authority (FCA) built for victims of the motor finance scandal. The watchdog says it will fight them.
The consumer group Consumer Voice, represented by Courmacs Legal, is one of the challengers. It argues the scheme massively short-changes victims, according to the Guardian. The other three are lenders: Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance. The FCA said none of the claims it received were expressly in the name of individual consumers.
“We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long running and complex issue,” the FCA said. It added that the challenges “create fresh uncertainty for millions of consumers and for the second largest consumer credit market.”
What the scheme pays
The FCA issued the final terms in March. Of the £9.1bn, about £7.5bn goes to borrowers and the remaining £1.6bn covers administrative costs for banks and specialist lenders. Aggrieved borrowers are due £830 on average for each mis-sold loan. That is a fraction of the up to £44bn some analysts had suggested banks could face before last summer’s supreme court ruling.
The scandal itself involved drivers overcharged on loans because of commission payments between lenders and car dealers from 2007 to 2024.
Delay for drivers
The challenges could take the FCA to the upper tribunal, where a judge would be asked to review the merits of the scheme. That could hold up payouts, which were expected to begin as early as this summer.
The regulator said it was “engaging at pace” with lenders and consumer groups and looking at next steps, including “contingency planning”. It also pointed to support elsewhere. “We welcome the broad support for the scheme and the commitment from most lenders to implement it,” it said, calling the final scheme “fair to consumers and proportionate for firms.”
