The motor finance industry’s trade body is mulling lodging a legal battle against the UK financial watchdog‘s £9bn redress scheme.
The Finance and Leasing Association (FLA), which counts Santander and the financial arms of BMW and Volkswagen among its members, is reported to be leaning towards challenging the City regulator’s scheme.
Members of the body are currently deliberating their next move, with a decision expected as soon as Sunday.
But sources told Sky News that a legal challenge to the car-misselling scheme was “overwhelmingly likely”.
Earlier this week, Consumer Voice – a group dedicated to helping consumers claim compensation – said it was taking the “unprecedented” step of applying to the Upper Tribunal for a review of the scheme as it stands.
The group argued that the regulator had excluded the “vast majority” of complaints from its scheme through its application of the Supreme Court ruling from August 2025.
The highest court in the land ruled in favour of the banks on two out of three cases but left the door open for an industry redress scheme after finding one claimant’s commission was outsized on the grounds of “unfairness”.
Motor finance bill cut at end of March
At the end of March, the Financial Conduct Authority (FCA) revealed the final rules of its industry-wide redress scheme, where the headline costs for the motor finance industry were cut to £9.1bn from £11bn.
It came after the number of qualifying agreements for the scheme dropped to 12.1m from 14.2m. Despite less people being eligible for the new scheme, the regulator anticipates an average payout of £830.
The FCA has said it would run two schemes, one for 2014 to 2024 deals, which will allow payments to begin being made this year, and a second relating to deals pre-2014. The deadline for this scheme to be set up is August 2026.
RBC analysts suggested the FCA appeared to “envisage” further legal action with the way the scheme were set up and added “it was highly likely that at least one, if not multiple, of the many interested parties will ask the administrative courts to review the scheme.”
In response to the publication, FLA boss Shanika Amarasekara said: “While the FCA has clearly endeavoured to make the redress scheme more proportionate than the proposed scheme consulted on in October, it will take time for us to assess the market impact of the measures announced today”.
Amarasekara added: “Any redress scheme for a market of this size must accurately identify and compensate only those customers who genuinely suffered loss.
Banks have also hit back at the scheme accusing it of mis-interpreting the Supreme Court judgement.
Lloyds – which is on the hook for a whoppin £2bn – has said whilst it remains “disappointed” with the final scheme and “disagree with its conclusions” it would not legally challenge it.
The FLA has been contacted for comment.
