The UK financial regulator has confirmed it will defend its £9.1 billion redress scheme after receiving four legal challenges, warning the action risks delaying resolution for millions of consumers and creates fresh uncertainty for the wider market.
The Financial Conduct Authority (FCA) said its objective “has been, and remains, to ensure consumers receive fair compensation as quickly as possible and to maintain a healthy motor finance market”, insisting that an industry-wide scheme remains the most cost effective and efficient way to resolve the issue.
“We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long running and complex issue,” it said.
Legal challenges confirmed
The FCA said it had received four legal challenges: one from Consumer Voice represented by Courmacs Legal and three from lenders – Volkswagen Financial Services, Mercedes Benz Financial Services and Credit Agricole Auto Finance.
Read Motor finance redress: from commission to compensation
The regulator said it respected the right of parties to challenge the scheme although noted that none of the claims had been brought directly by individual consumers.
FCA scheme aims
The regulator said it had engaged widely with both lenders and consumer groups in designing the scheme, making changes to reflect feedback while acknowledging that not all parties would agree with every aspect.
“An industry wide scheme is the fastest, simplest route for consumers and the most efficient way for firms to put things right and give certainty to their investors,” it said.
The FCA also welcomed what it described as broad support from most lenders, praising their “pragmatic approach” in committing to implement the scheme despite its scale and complexity.
Pragmatism praised
However, it acknowledged that some firms faced difficult decisions and said it appreciated those that had prioritised delivering an outcome for customers, many of whom have been waiting more than two years.
The regulator said it is now engaging with lenders and consumer groups to assess next steps including contingency planning, adding that it plans to provide further guidance to firms next week.
In the meantime, it repeated its advice to consumers to complain directly to their lender if they have concerns, stressing that this is free and does not require the use of claims management companies which may charge more than 30% of any compensation.
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