The FCA introduced the redress scheme following a Supreme Court ruling on the issue last year. The regulator expects the scheme to generate roughly £7.5 billion in payouts across 12.1 million loans taken out between 2007 and 2024, with operating costs of £1.6 billion.
Under the proposals, lenders must calculate refunds using either a 17% or 21% reduction in the annual interest rate charged on a loan, depending on when the agreement was made.
Lawyers acting for Volkswagen Financial Services, led by Richard Handyside KC, told the tribunal the interest rate reductions were “not reasonable proxies for loss and are not evidentially supported.” They said the lender “strongly supports the introduction of a consumer redress scheme in relation to motor finance agreements,” but added that “any such scheme must be lawful.”
The lawyers also argued the scheme amounted to “a disproportionate interference” with the company’s property rights, claiming the FCA “could have designed a more targeted and proportionate scheme that met its objectives.”
Lord Keen of Elie KC, representing Mercedes-Benz Financial Services, told the tribunal the regulator had exceeded its legal authority. He criticised the FCA’s treatment of loans from in-house finance providers, saying its “view of the market as a monolithic bloc is simply wrong” and that “the FCA irrationally disregarded the data in favour of its own unexplained assumptions.”