Blue Motor Finance is reportedly on the verge of collapsing into administration after the confirmation of an industry-wide compensation scheme worth £9 billion. According to Sky News, the company is lining up administrators as it faces a redress bill exceeding £50 million. Accountancy firm EY is expected to oversee the insolvency process if no rescue deal is reached.
Drivers are anticipated to receive around £829 each in car finance payouts, but the compensation scheme is facing legal challenges. The Financial Conduct Authority (FCA) is confronting four legal challenges against its £9.1 billion compensation scheme for victims of the motor finance scandal. The FCA stated it will defend the scheme 'robustly,' describing it as the fastest and simplest route for consumers and the most efficient way for firms to rectify the issue.
The FCA estimates the total scheme will cost lenders and banks approximately £9.1 billion, with millions of drivers expected to receive an average of £829 per agreement. One of the challenges comes from Consumer Voice, represented by Courmacs Legal, the only limited company to challenge the scheme. Alex Neill, co-founder of the consumer rights organisation, warned that 'getting it wrong now would mean underpayment for millions of people to the tune of billions of pounds.'
The three other legal challenges were lodged by lenders: Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance. The FCA said, '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.'
The FCA noted it is engaging at pace with lenders and consumer groups to understand all views as it considers next steps for the scheme, including contingency planning. The regulator added, 'We welcome the broad support for the scheme and the commitment from most lenders to implement it. The final scheme is fair to consumers and proportionate for firms. Lenders have taken a pragmatic approach recognising that introducing a scheme on this scale promptly has required us to make judgments to simplify in a reasonable and lawful way some complex legal and operational issues. Alternative approaches would be slower and much more costly for firms.'
