FCA Warns Car Finance Redress Faces Delays

The UK's Financial Conduct Authority has warned that its planned redress scheme for millions of mis-sold car finance agreements faces potential delays, changes or even collapse due to four ongoing legal challenges. The regulator updated firms and consumers on Friday, advising them to prepare for a scenario with no industry-wide program.

The scheme, finalized in March, targets agreements from April 6, 2007, to November 1, 2024, where consumers were not fully informed about discretionary commission arrangements. These involved lenders paying brokers commissions that influenced interest rates without disclosure to borrowers. Other issues include excessively high commissions or brokers favoring specific lenders without telling customers. The FCA estimates around 12 million agreements qualify, with average payouts of about 830 pounds per case and total industry costs of 9.1 billion pounds. Payouts were due to begin this year, with most settled by the end of 2027.

Legal action comes from Volkswagen Financial Services, Mercedes-Benz Financial Services, Credit Agricole Auto Finance and Consumer Voice, a consumer group. Challengers argue the scheme's rules are unlawful, with claims that...