Car finance redress update could allow mass complaints as millions wait for compensation

An attempt to block mass lawsuits over the car finance mis-selling scandal has been denied as millions of drivers await compensation.

Judges have dismissed an appeal by one of the UK's largest lenders, which aimed to stop lawyers bringing "omnibus" claims on behalf of a large group of drivers.

It comes as motorists wait for compensation from the Financial Conduct Authority's redress scheme related to the car finance scandal and discretionary commission agreements.

This involved dealers getting more commission when car buyers took out loans, without drivers explicitly being told what was happening in the background.

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Once investigated by the FCA, it announced a consultation to see how a redress scheme could benefit drivers while also protecting the industry.

The FCA confirmed that the final compensation policy would cost £9.1billion, including £7.5billion for 12.1 million eligible agreements, at an average cost of £829 per agreement.

Under timelines set out by the FCA, the vast majority of claims are expected to be settled by January 2028, although this could be pushed back as appeals are made.

At the start of May, the FCA stated that it had received four legal challenges in response to the car finance scandal.

The challenges come from Consumer Voice, which is represented by Courmacs Legal Ltd, as well as Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance.

Consumer Voice claims that drivers could be undercompensated in the current FCA plan, arguing that some people could be owed far more than £829 per agreement.

Alex Neill, co-founder of Consumer Voice, said: "We support a redress scheme, but this one does not go far enough.

"Millions of drivers were overcharged through hidden and unfair commission, yet the FCA’s scheme risks leaving many of them missing out on hundreds of pounds they're owed."

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In this week's case, the Court of Appeal sided with the claimants, potentially allowing for mass compensation demands to be made outside of the FCA scheme.

The FCA has consistently highlighted that its redress scheme is the "simplest route for consumers and the most efficient way for firms to put things right".

It warned that alternative approaches would be slower and cost firms more, especially if they use a claims management company (CMC) or law firm.

The financial regulator claimed that CMCs could take up to 30 per cent of their payout, potentially leaving them with less than they would have received from the FCA's redress scheme.

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