12:06 pm, June 9, 2026
The Financial Conduct Authority (FCA) is likely to delay approving payouts to customers over mis-sold finance until at least 2027, its deputy chief has said.
The watchdog is facing several legal battles over the redress scheme, and has so far spent more than £20m on developing it and that further costs lie ahead.
It’s facing four separate legal challenges from companies who are not happy with its plans for redress, which involve paying out an average of £829 for an estimated 12.1m eligible car finance agreements.
These agreements involved so-called discretionary commission arrangements – widely known as ‘hidden’ commission – which meant motorists did not get a fair deal when they took out a loan on their car, according to the FCA.
Payments through the scheme were meant to start this year but are now being delayed.
Sarah Pritchard, deputy chief executive of the FCA, told MPs at the Treasury Select Committee: ‘I want to be straightforward that the legal challenge will add delay and extra costs to the scheme as a whole.
‘If the scheme goes ahead, the delay, we believe, will result in payments not before 2027.’
The financial services arms of carmakers Volkswagen and Mercedes-Benz and the car finance arm of French bank Credit Agricole, as well as Consumer Voice, a group representing consumers, are asking the courts to quash the scheme, arguing the rules are unlawful.
No UK bank has decided to challenge the scheme which is set to cost the industry £9.1bn.
In a letter to the committee, FCA chief executive Nikhil Rathi warned that the scheme could be ‘struck down in whole or part’ as a result of the legal challenges, and it would need to then decide what to do next so that people still get compensation they are owed.
This could involve switching to a complaints-led approach to resolving individual claims, which he estimates would cost lenders £6bn more and take three years.
More on the FCA redress scheme…
- FCA launches investigation into claims management company over motor finance crisis
- FCA hits out at lenders over redress challenge that will create ‘fresh uncertainty for millions’
- Mercedes-Benz and two other firms to challenge FCA over motor finance redress scheme
- £7.5bn compensation scheme for motor finance scandal revealed by FCA
- Close Brothers Motor Finance estimates 720,000 of its loans will qualify for redress scheme
- FCA bans fake Martin Lewis motor finance ads after ‘unauthorised clips’ used
