A group of motor finance lenders has accused the Financial Conduct Authority (FCA) of 'working backwards' to justify its redress scheme. Mercedes-Benz's financial services arm, Volkswagen Financial Services, and Credit Agricole are challenging the scheme, which is expected to cost the industry billions.
Mercedes-Benz, which has allocated up to £400m for potential payouts, stated that the FCA's 'one-size-fits-all approach' risks the scheme's overall success. The firm argued that the regulator placed 'overmuch emphasis' on its expertise, suggesting that legal errors could be overlooked for policy reasons.
The FCA introduced the £9.1bn scheme after a Supreme Court judgment last year found an undisclosed commission created an 'unfair relationship' for one customer. The watchdog suspended parts of the programme in July, which anticipates an average payout of £830 for motorists, as it prepares to defend against the challenges.
The FCA plans to 'robustly' defend the scheme, with hearings scheduled for as late as February 2027 in the Upper Tribunal. The regulator has branded the lenders' interpretation of the redress as 'absurd'.