UK Car Finance Probe Ends: £9.1bn Compensation Scheme Stands

The main trade body for UK car finance providers has chosen not to challenge the Financial Conduct Authority's (FCA) scheme for compensating consumers over alleged mis-selling of loan agreements. This decision provides a significant boost to the FCA, which had proposed a redress program estimated to cost lenders £9.1bn. Banks were preparing a legal challenge before the Monday night deadline but appear to have yielded to pressure for resolution.

Shanika Amarasekara, FLA chief executive, stated that while concerns remain, the priority is a practical solution ensuring timely compensation and clarity for the industry. Despite this, Consumer Voice, a group assisting consumers with claims, announced last week its intention to take the FCA to court. Consumer Voice contends the scheme fails to provide fair or adequate redress and systematically under-compensates consumers.

This legal challenge from Consumer Voice, if accepted by London's Upper Tribunal, could delay compensation payments to millions of consumers, marking the first court challenge to an FCA redress scheme. The FCA has urged law firms and claims management companies involved in a challenge to inform their clients about potential delays and consider waiving fees. The FCA recently revised its cost estimate downwards from £11bn to £9.1bn, adjusting the number of eligible car loans and increasing the average payout per loan to £829.