The Financial Conduct Authority (FCA) is facing four legal challenges against its £9.1bn compensation scheme for victims of the motor finance scandal. The watchdog confirmed it will defend the scheme “robustly”, describing it as the “fastest, simplest route for consumers”.
The legal actions include a challenge from consumer group Consumer Voice, which claims the scheme short-changes victims, and separate challenges from lenders Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance. The FCA said none of the claims were expressly in the name of individual consumers.
The FCA stated: “We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long running and complex issue. These legal challenges create fresh uncertainty for millions of consumers and for the second largest consumer credit market.”
Under the scheme, aggrieved borrowers are due to receive £830 on average for each mis-sold loan. The FCA said it is “engaging at pace” with lenders and consumer groups, including contingency planning.
The challenges could delay payouts, which were expected to begin as early as this summer, if the cases go to the upper tribunal. The FCA issued final terms in March, with £7.5bn for borrowers and £1.6bn for administrative costs, a fraction of the up to £44bn some analysts had predicted before a Supreme Court ruling last summer.
