Martin Lewis has warned people hoping for compensation as part of the £9.1billion car finance scandal that pay outs are on hold following a new development. The personal finance expert confirmed that there will be more delays after a court hearing to hear legal challenges will happen from February 16-26.
This means that people hoping for money back will have to wait even longer. Mr Lewis said it was the 'later of the two date options', meaning an even longer wait for those affected. December had been the other proposed date.
Legal challenges to redress plans
Volkswagen Financial Services, Mercedes-Benz Financial Services, and Credit Agricole Auto Finance are all challenging redress plans put forward by the Financial Conduct Authority (FCA), which is looking to see motorists who unfairly purchased vehicles using car finance between 2007 and 2024.
It is thought that around 12.1million agreements on either PCP or Hire Purchase were signed which could be eligible for compensation, at an average of £829. That would mean more than £9billion in compensation.
Mr Lewis said: "The legal challenge to @TheFCA's car finance mass redress scheme will be heard in court 16-26 Feb. Sadly that's the later of the two date options, so even more delay. Firms must still deal with complaints under the scheme now, but pay outs are on hold."
'Heavily criticised'
Consumer Voice, which is mounting its own challenge to the FCA’s proposals, criticised the latest delay. Co-founder Alex Neill said: "Consumer Voice is ready to take our challenge to trial with a potential hearing date listed for December 2026, which has now had to be abandoned. The final hearing is now listed to take place in February 2027."
The FCA and lender applicants blame each other for the delay. The FCA’s approach to disclosure has been heavily criticised by all parties whilst the FCA blames the lenders’ requests for extensive disclosure of underlying data and reliance upon fresh expert evidence as the cause of the trial being pushed into next year.
What to do now
The FCA has told affected firms that 'there may be no motor finance compensation scheme and no complaint handling pause'. Currently, lenders must continue to accept complaints for as long as possible.
People are able to check their eligibility and put in a claim without the help of a lawyer or a claims management firm. This scheme has been challenged though and it will be heard by the Upper Tribunal in February.
The BBC says: "Until then lenders are unlikely to contact you to inform you how much you're owed. They may still be contacting you to inform you that you're not eligible for compensation, however, so keep an eye out for that."
The FCA is still encouraging motorists to submit claims if they think they are affected.
What Martin says
"There is another way you can do this – go to court and you may get more," he told MoneySavingExpert. "I've focused on the regulator's mass scheme. Yet it's important to understand the payouts are not as high as a court may award, based on some past cases."
"My guess is the FCA watered them down primarily to find a compromise to try and ensure that lenders don't derail the process. Only time will see if it's enough. Yet equally, if it's watered down too much, that'll push more people to go to court."
"And this is the reason – when those who've complained get sent the letter asking if they want a payout – it's important you have a right to say 'no', as you may choose the court route instead. Yet while you may get more via court, it's likely that 30% (or more) would go to pay claims firms/lawyers' fees, which will eat away at a chunk of any payout."
