Legal challenges to FCA car finance compensation scheme

The Financial Conduct Authority (FCA) has received legal challenges to its car finance compensation scheme.

The compensation scheme relates to finance taken out to buy a car, motorbike or van between 6 April 2007 and 1 November 2024. Many lenders of such finance did not provide important information about the agreements, and broke FCA rules. The FCA estimates that around 12.1 million agreements made during this time are eligible for compensation.

The scheme, which is due to start on 30 June 2026 for loans taken out from 1 April 2014, has received broad support and a commitment from most lenders to implement it.

However, the scheme has now received four legal challenges. One is from Consumer Voice, and the other three are from lenders: Volkswagen Financial Services, Mercedes-Benz Financial Services and Credit Agricole Auto Finance.

The FCA has said that it will defend the scheme robustly as lawful and the best way to resolve such a widespread, long-running and complex case.

In view of the fresh uncertainty these legal challenges create, the FCA has said that it is “engaging at pace with lenders and consumer groups” and will provide further advice shortly.

In the meantime, the FCA continues to advise consumers to complain directly to their lender. They remind complainants that this is free to do and does not require the services of a law firm or claims management company that will take a cut of any compensation.

See: https://www.fca.org.uk/news/statements/fca-statement-legal-challenges-motor-finance-scheme