FCA £9.1bn Car Finance Scheme Faces Legal Challenges

The Financial Conduct Authority faces legal challenges from three lenders and a consumer group over its proposed 9.1 billion pound industrywide compensation scheme for car finance misselling, creating fresh uncertainty for millions of affected drivers.

The challengers include the financial services arms of Volkswagen and Mercedes-Benz, as well as the car finance division of Credit Agricole. Consumer Voice, a group representing motorists, has also filed for a review in the Upper Tribunal under section 404D of the Financial Services and Markets Act 2000. This marks the first such challenge to an FCA redress scheme. The lenders and group contest the final details unveiled by the FCA in March, which are projected to cost the industry around 9.1 billion pounds.

The FCA maintains the scheme is fair to consumers and proportionate for firms. In a statement, the regulator said, "We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long-running and complex issue. These legal challenges create fresh uncertainty for millions of consumers and for the second-largest consumer credit market, with 39 billion pounds borrowed in 2024. We are therefore...