Car finance payouts may face years of delay due to legal challenges, FCA warns
8 reported2 unconfirmed
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 the claims legal firm Courmacs Legal. The challenges involve the FCA’s £9.1bn compensation programme for drivers overcharged on loans due to commission payments between lenders and car dealers between 2007 and 2024. The FCA’s 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 go through the Financial Ombudsman Service. The FCA also estimated it would take a near-£3m hit from legal costs, potentially forcing internal resource shifts.
What’s reported
The FCA warned legal challenges could delay payouts by three years and add £6bn in extra costs for lenders.
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 on loans due to commission payments between lenders and car dealers from 2007 to 2024.
The FCA’s compensation programme is valued at £9.1bn.
Even if the scheme is upheld by a judge, 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 complaints through the Financial Ombudsman Service.
The FCA estimated legal costs of about £2.7m, potentially requiring internal resource pivots.
Labour MP John Grady questioned whether the timetable accounts for possible appeals to the court of appeal or supreme court.
Open questions
Whether the legal challenges will result in the scheme being upheld, rejected, or modified.
How long any potential appeals process might take beyond the FCA’s estimates.
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)
Mercedes-Benz Financial Services (lender)
Crédit Agricole Auto Finance (lender)
Consumer Voice (campaign group)
Courmacs Legal (claims legal firm)
Lloyds Banking Group, Santander UK, Barclays (wider group of banks implicated)
Sources: The Guardian
