FCA warns car finance payouts may be delayed by years due to legal challenges
10 reported
The Financial Conduct Authority (FCA) has warned that legal challenges to its compensation scheme for the motor finance scandal could delay payouts to drivers by up to three years and add £6bn in extra costs for lenders. The FCA is facing legal challenges from four parties: Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and the campaign group Consumer Voice, which has teamed with claims legal firm Courmacs Legal. The challenges involve the FCA’s £9.1bn compensation programme, which was expected to begin payouts as early as this summer. FCA deputy chief executive Sarah Pritchard told MPs on the Treasury committee that even if a judge backs the scheme, payouts would be delayed into 2027. If the scheme is rejected, the FCA may launch consultations on a new plan or abandon it entirely, letting complaints be handled through the Financial Ombudsman Service. The FCA also estimates it will take a near-£3m hit from legal costs, which could force internal resource shifts.
What’s reported
The FCA warned legal challenges could delay car finance payouts by three years and add £6bn in extra lender costs.
Four parties are challenging the FCA’s compensation scheme: Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and Consumer Voice with Courmacs Legal.
The scandal involves drivers overcharged for loans due to commission payments between lenders and car dealers from 2007 to 2024.
The FCA’s compensation programme is valued at £9.1bn.
Payouts were expected to begin as early as summer 2026.
If the judge backs the scheme, payouts would be delayed into 2027, per FCA deputy chief executive Sarah Pritchard.
If the scheme is rejected, the FCA may launch consultations on a new plan or abandon it for the Financial Ombudsman Service.
FCA chief executive Nikhil Rathi said a complaints-led approach would cost lenders over £6bn more and take three years.
Labour MP John Grady questioned the FCA’s timetable, noting possible appeals to the court of appeal and supreme court.
The FCA expects a near-£3m hit from legal costs, with deputy chief executive Sarah Pritchard citing £2.7m in extra costs.
Key figures
Sarah Pritchard, deputy chief executive of the FCA
Nikhil Rathi, chief executive of the FCA
John Grady, Labour MP
Volkswagen Financial Services (lender challenging scheme)
Mercedes-Benz Financial Services (lender challenging scheme)
Crédit Agricole Auto Finance (lender challenging scheme)
Consumer Voice (campaign group challenging scheme)
Courmacs Legal (claims legal firm working with Consumer Voice)
Lloyds Banking Group (bank implicated in scandal)
Santander UK (bank implicated in scandal)
Barclays (bank implicated in scandal)
Sources: The Guardian
