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\t\tThe motor finance saga is heading for another legal row.\t<\/p>\n\t\t\tFriday 08 May 2026 3:24 pm\n\t\t\t<\/p>\n
\t\tThe motor finance saga is heading for another legal row.\t<\/p>\n
The City watchdog has told lenders to prepare for the \u201calternative scenario of no scheme\u201d in the long-running<\/a> motor finance scandal as another legal showdown brews.<\/p>\n The Financial Conduct Authority (FCA) has received four legal challenges including from lenders Volkswagen Financial Services, Mercedes-Benz Financial Services and Cr\u00e9dit Agricole Auto Finance.<\/p>\n On the consumer side, the regulator is facing an omnibus claim for Consumer Voice, where is represented by Courmacs Legal.<\/p>\n The regulator said on Friday it would \u201cdefend [the scheme] robustly\u201d but warned the legal challenges<\/a> were calling for the Upper Tribunal to \u201c\u2018quash\u2019 or invalidate\u201d it.<\/p>\n \u201cIt is important that all involved now\u00a0also\u00a0focus on contingency plans and prepare for the alternative scenario of no scheme, as we set out\u00a0consistently\u00a0through the consultation,\u201d the FCA said.<\/p>\n The watchdog added it was \u201cprudent\u2026 to supervise all lenders against a central planning assumption that under that scenario there would be no scheme.\u201d<\/p>\n Should the scheme go ahead as planned, compensation payments, which are expected to average at \u00a3830, to consumers are expected to begin in late 2026.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tMercedes Benz joins legal battle over \u00a39bn motor finance scheme<\/a><\/p>\n \tMotor finance lenders accuse FCA of violating of Human Rights Act<\/p>\n The return to the legal arena comes after the motor finance scandal \u2013 which relates to \u2018secret\u2019 commission deals between lenders and dealers that left customers in the dark \u2013 travelled through the Court of Appeal and the Supreme Court.<\/p>\n The highest court in the land ruled last year in the favour of lenders on two out of three cases brought to the Justices, but the door was opened for an industry-wide redress scheme on the grounds of \u2018unfairness\u2019 after the commission charged to one consumer was found to be outsized. <\/p>\n The final rules of the scheme<\/a> were announced at the end of March and brought the overall costs for the industry down to \u00a39.1bn, from \u00a311bn previously. It came after the number of qualifying agreements for the scheme dropped to 12.1m from 14.2m.<\/p>\n Challenges to the scheme have been filed on the FCA\u2019s application of the law relating to limitation periods, which affects whether consumers have suffered loss or damage for which compensation is payable.<\/p>\n The regulator added it had received a challenge by at least one of the applicants regarding the alleged unlawful interference with lenders\u2019 property rights under the Human Rights Act 1998.\u00a0<\/p>\n Despite being amongst the most exposed to the scandal, a handful of the City\u2019s banks have turned away from legal action.<\/p>\n Lloyds Banking Group \u2013 which has set aside \u00a32bn in payouts \u2013 said whilst it was \u201cdisappointed\u201d it would not challenge the scheme. Meanwhile, Santander\u00a0raised its provisions to \u00a3640m<\/a>\u00a0leading to a first-quarter profit hit but the Spanish banking giant has also confirmed it will not challenge the scheme.<\/p>\n \t\t\t\t\tRead more<\/p>\n