Car finance payouts could be delayed by years over legal challenges, says FCA

Drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024. Photograph: Justin Kase zsixz/Alamy View image in fullscreen Drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024. Photograph: Justin Kase zsixz/Alamy Car finance payouts could be delayed by years over legal challenges, says FCA Complaints-led approach could pile £6bn of extra costs on to lenders, says City watchdog Business live – latest updates The City watchdog has warned that a wave of legal challenges to the compensation scheme for victims of the motor finance scandal could leave drivers waiting three more years for payouts, while piling £6bn of extra costs on to lenders. Bosses at the Financial Conduct Authority (FCA), who have consistently hit out at lenders and a consumer claims group for challenging its scheme, told MPs the scandal could affect lenders for years, and have “consequences” by stretching its resources. The FCA is facing legal challenges from four parties over its compensation scheme: lenders Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance, as well as the consumer group Consumer Voice , which has teamed with the claims legal firm Courmacs Legal to assert that the drivers are being short-changed. UK regulator launches review of ‘aggressive’ claims management firms amid compensation concerns Read more The challenges dashed the regulator’s hopes of drawing a line under the scandal , in which drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024. The FCA is instead being hauled to the upper tribunal, where a judge would be asked to review the merits of the long-awaited £9.1bn compensation programme. That could end up delaying payouts to drivers , which were widely expected to begin as early as this summer. Even if the judge backs the FCA scheme, that would delay payouts into 2027, the FCA deputy chief executive, Sarah Pritchard, told MPs on the Treasury committee on Tuesday. If it is shot down, “then we will need to consider what the options may be,” she added. That would include launching a consultations on a newly crafted compensation scheme, or abandoning it entirely and letting complaints be sorted out through the Financial Ombudsman Service (FOS), Pritchard said. “We estimate it would cost lenders over £6bn more and take three years to resolve claims through a complaints-led approach,” the FCA chief executive, Nikhil Rathi, said in a letter released before the committee hearing. That would affect not only the lenders challenging the scheme, but the wider group of banks implicated in the scandal, including Lloyds Banking Group, Santander UK and Barclays. Labour MP John Grady questioned the FCA’s estimates, noting that the process could last even longer than its forecast. “The timetable you’ve set out, I suspect, does