Car finance payouts could be delayed by years over legal challenges, says FCA
The FCA says legal challenges could push car finance payouts into 2027 and add more than £6bn in costs for lenders.
Intelligence analysis by GPT-5.4 Mini
The FCA says court challenges to its motor finance redress plan could upend a £9.1bn compensation scheme, delaying payments and widening costs across the banking sector. The regulator says the dispute may keep the scandal alive for years.
A big argument is going on about money people may be owed for car loans. The referee says the fight could drag on for years, like waiting in a very long line that keeps getting longer.
Analysis
What happened
The Financial Conduct Authority says challenges to its motor finance compensation scheme could delay payouts to drivers by years. The plan covers people who were overcharged on car loans because of commission arrangements between lenders and car dealers from 2007 to 2024.
Why the timetable may slip
The FCA is facing four legal challenges: from Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and the consumer group Consumer Voice, which is working with Courmacs Legal. The regulator had hoped to settle the scandal and start payments as early as this summer, but the dispute is now heading to the upper tribunal.
If a judge backs the FCA, Sarah Pritchard told MPs that payouts could still be pushed into 2027. If the scheme is rejected, the FCA says it may need to design a new compensation plan or leave cases to the Financial Ombudsman Service.
Cost to lenders and the regulator
In a letter released before the Treasury committee hearing, FCA chief executive Nikhil Rathi said a complaints-led process would cost lenders more than £6bn extra and take about three years to resolve. The regulator said that would hit not just the firms challenging the scheme, but also other banks involved in the scandal, including Lloyds Banking Group, Santander UK and Barclays.
The FCA also said the court fight would cost it about £2.7m in extra spending, forcing it to shift resources internally. MPs questioned whether the legal process could take even longer if cases moved beyond judicial review to the Court of Appeal or Supreme Court.
The central message from the FCA is that consumers have already waited a long time, but the legal battle now risks stretching that wait further.
Key points
- The FCA says legal challenges could delay motor finance payouts by up to three years.
- The compensation scheme is worth about £9.1bn and covers overcharging linked to commission arrangements from 2007 to 2024.
- Four parties are challenging the scheme, including three lenders and consumer group Consumer Voice.
- The FCA says a complaints-led route could cost lenders more than £6bn extra.
- The regulator says the court fight is already costing it about £2.7m and forcing internal resource shifts.
If the FCA’s scheme survives the legal challenges, the regulator says there is still a path to compensation, even if it slips to 2027. That would give drivers a formal route to be paid without having to pursue separate complaints one by one.
If the scheme is overturned, the FCA says it may have to build a new plan or send claims through the ombudsman system instead. That could mean longer waits, higher costs for lenders, and more uncertainty for consumers who have already been waiting for redress.
