UK FCA's car finance redress scheme hit by legal challenges as claims management probe begins

The Financial Conduct Authority (FCA) confirmed that four separate legal challenges have been filed against its motor‑finance redress scheme, which is designed to compensate more than 12 million drivers after a widespread car‑finance mis‑selling scandal. The scheme is expected to cost lenders about £9.1 billion, with an average payout of £829 per agreement.

The challenges include a claim by consumer group Consumer Voice, arguing that compensation levels are insufficient, and three separate filings by lenders Volkswagen Financial Services, Mercedes‑Benz Financial Services and Crédit Agricole Auto Finance. The FCA said it will robustly defend the scheme, but warned that the disputes could delay payments, most of which are now projected to be completed by the end of 2027 or early 2028.

At the same time, the FCA announced a new investigation into claims‑management companies, focusing on alleged poor practices and aggressive marketing that have risen in prominence following the car‑finance scandal. The probe aims to ensure fair treatment of consumers and compliance with regulatory standards.