Drivers across the UK are facing fresh uncertainty over potential £829 payouts after Volkswagen, Mercedes-Benz, and a French bank launched legal challenges against the Financial Conduct Authority's (FCA) industry-wide compensation scheme.
The financial services divisions of Volkswagen and Mercedes-Benz, along with the car finance arm of Credit Agricole, are contesting the plans. The FCA has warned that these challenges create fresh uncertainty for millions of consumers and the second-largest consumer credit market, with £39 billion borrowed in 2024.
The FCA stated: "We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long-running and complex issue." The regulator added that it is engaging with lenders and consumer groups to determine next steps, including contingency planning.
Consumer Voice, a consumer rights organisation, is also set to apply to the Upper Tribunal for a review of the scheme under section 404D of the Financial Services and Markets Act 2000. This will be the first time an FCA redress scheme has been subject to such a challenge.
Consumer Voice believes the FCA should give drivers access to a redress scheme that fairly reflects the harm suffered, with properly calculated compensatory interest. The group argues that consumer redress has been minimised to protect lenders, misunderstanding the FCA's market integrity objective and minimising consumer protection.
Alex Neill, co-founder of Consumer Voice, said: "We are taking this unprecedented step to challenge the regulator’s redress scheme because it doesn’t deliver fair or lawful compensation for drivers. We support a redress scheme being put in place, but as it stands millions of people will be under-compensated, and the lenders involved in this scandal won’t be meaningfully held to account."
Neill added: "The FCA has designed a scheme that leaves ordinary motorists hundreds of pounds per claim out of pocket. That cannot be left unchallenged. The FCA has treated the Supreme Court’s judgment in Johnson as a rigid benchmark to exclude most consumers from full commission redress, even though the Court itself acknowledged it was a fact-sensitive decision."
These legal challenges are likely to result in delays for the payments, leaving millions of UK drivers in limbo.
