The Financial Conduct Authority (FCA) has warned that legal challenges could delay car finance payouts for victims of the motor finance scandal by up to three years. The compensation scheme, which could see drivers receive an average of £829 each, is facing legal action from four parties, including Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and the consumer group Consumer Voice.
FCA Warns of Delays and Costs
In a letter released before a Treasury committee hearing, FCA Chief Executive Nikhil Rathi stated: "We estimate it would cost lenders over £6bn more and take three years to resolve claims through a complaints-led approach." The regulator is also facing its own legal costs, with executive Sarah Pritchard telling MPs that the immediate legal challenge will cost around £2.7 million extra. She added: "Of course, if this goes on longer, we will need to consider how we move our resources internally. It will come at some cost."
Potential for Further Appeals
Labour Party MP John Grady noted that the judicial review could escalate to the Court of Appeal and the Supreme Court, further prolonging the process. Pritchard acknowledged that consumers have been waiting a long time for compensation and stressed that "one way or another, they need to be compensated."
The delays dash hopes of resolving the motor finance scandal, which saw drivers overcharged on loans between 2007 and 2024 due to hidden commission payments between lenders and car dealers. The estimated average payout of £829 remains a key figure for affected consumers, but the timeline remains uncertain.
