The Financial Conduct Authority (FCA) has warned that millions of consumers face “fresh uncertainty” over compensation for being mis-sold car loans, as it faces legal challenges to its £9.1 billion redress scheme.
Three lenders—Volkswagen Financial Services, Mercedes-Benz Financial Services, and Credit Agricole Consumer Finance—along with consumer group Consumer Voice, have launched legal challenges against the FCA's industry-wide compensation plan. Consumer Voice argues the scheme will short-change drivers who suffered harm when taking out loans.
The FCA said it would defend the scheme as “fair to consumers and proportionate for firms,” but acknowledged the legal challenges create uncertainty for consumers and the £39 billion car finance market. The watchdog is engaging with lenders and consumer groups to determine next steps, including contingency planning.
Despite the uncertainty, the FCA continues to advise consumers to complain directly to their lender using a free template letter on its website, urging them not to use law firms or claims management companies that may charge over 30% of compensation.
