Mercedes-Benz and two other lenders have moved to challenge the Financial Conduct Authority’s (FCA) compensation scheme for motorists who were mis-sold car loans. The FCA will now face a legal battle over its redress programme, after a group representing consumers also lodged an appeal.
This development comes just days after several of the UK’s biggest lenders announced they had decided not to pursue a challenge against the watchdog’s plans.
A spokeswoman for Mercedes-Benz stated: “Given that this is subject to ongoing legal proceedings, we cannot comment further.” The German carmaker is exposed to the car finance mis-selling saga through its financial services arm.
The FCA confirmed that two other lenders were also appealing. While it did not name the firms, reports from Sky News have indicated that Volkswagen Financial Services is one of the companies involved.
A spokeswoman for the FCA said: “We have received challenges from three lenders in addition to the challenge from Consumer Voice, represented by Courmacs Legal. We are considering our approach and will set out more later this week.”
Earlier this week, it appeared that the watchdog had a clearer path to proceed with the compensation plans after the main industry body joined major lenders in backing out of any legal challenge. The Finance and Leasing Association (FLA) said it had “concerns” about the programme but chose not to raise a challenge, while Santander, Barclays, and Lloyds also decided to accept the scheme as it is.
The FCA estimates that payouts are due on 12.1 million mis-sold car finance deals from an array of lenders, expected to result in compensation totalling around £7.5 billion. The deadline for companies to lodge legal challenges to the watchdog’s scheme passed on Monday.
While the lenders are likely to be resisting the billions of pounds of compensation they are required to pay, the FCA is also being challenged on the other side by Consumer Voice. The group has applied to the Upper Tribunal for a review of the scheme, citing concerns that it could leave millions of consumers out of pocket by several hundred pounds per claim. Consumer Voice said it supports the need for an industry-wide scheme but argued that it should “fairly reflect” the harm drivers have suffered, with “properly calculated compensatory interest.”
