UK car finance firms weigh early payouts as scheme stalls

British car finance companies are discussing whether to offer consumers early compensation for a long-running mis-selling scandal, even as a major legal challenge delays a formal 9.1 billion pound redress scheme. The Financial Conduct Authority confirmed on Tuesday that some firms are exploring settlement offers for complaints that would have been processed through the scheme, which is now on hold.

The regulator has accused the industry of inadequately disclosing commission arrangements between lenders and car dealerships that allegedly encouraged brokers to hike interest rates on loans between 2007 and 2024. Under the proposed scheme, approximately 12.1 million eligible car finance agreements could qualify for compensation, with successful claimants expected to receive an average of 829 pounds.

However, legal challenges filed by the financial services arms of Volkswagen, Mercedes-Benz, Credit Agricole, and a consumer group will delay any payouts under the formal scheme until at least 2027 if it is upheld. The case is not expected to be heard before October. Nikhil Rathi, the FCA's chief executive, stated that the regulator welcomes ideas from firms on how they can start paying...