The Financial Conduct Authority (FCA) said this week that payments made under the motor finance redress scheme will, if it goes ahead, be delayed until 2027.
The FCA told MPs yesterday that payouts are likely to be delayed after complains were lodged ty three finance houses and a consumer protection body.
Sarah Pritchard, deputy chief executive of the FCA, told the Treasury select committee the objections were likely to increase its own costs.
“I want to be straightforward that the legal challenge will add delay and extra costs to the scheme as a whole. If the scheme goes ahead, the delay, we believe, will result in payments not before 2027.”
Last month The Financial Conduct Authority warned that it could have to pull the plug on the motor finance redress scheme depending on the outcome of challenges it faces from Mercedes-Benz, Volkswagen, Consumer Voice and Crédit Agricole Auto Finance.
It said in the challenges it has received the applicants argue that the rules governing the scheme are unlawful.
The banks and Consumer body have asked the Upper Tribunal to ‘quash’ or invalidate them on that basis.
The Financial Conduct Authority (FCA) has defended its industry-wide motor finance redress scheme against the four challenges.
In a statement at the time, it said: “We have not yet made any decisions on what we would do under various scenarios.
“However, if the scheme, or parts of it, were quashed, we would need to carefully consider all options, taking account of all relevant matters.
“That would include whether to proceed with a revised scheme. This would likely require further consultation, and any resulting rules or guidance could face further lengthy challenge.”
The National Franchised Dealers Association said it was disappointed on the delay. Sue Robinson, chief executive, said:
“It is disappointing that the process continues to face delays. Consumers and businesses alike have been waiting a long time for certainty and it is important that a fair and proportionate outcome is reached as quickly as possible. The sector needs clarity so that all parties can move forward with confidence.”
NFDA said it has consistently called for a practical and balanced approach to the issue and will continue to engage with the FCA and other stakeholders on behalf of its members as further details emerge.
