Motor finance legal battle set for February 2027

The Financial Conduct Authority (FCA) faces legal challenges from three major lenders, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance, as well as the consumer advocacy group Consumer Voice, over its motor finance redress scheme. The Upper Tribunal will hear the cases between February 16 and 26, 2027.

The regulator suspended the redress scheme in July after facing backlash, following a partial Supreme Court ruling that rejected claims hidden commissions were automatically unlawful. The FCA initially proposed to hold lenders accountable for £9.1 billion, but the number of qualifying agreements was reduced to 12.1 million from 14.2 million.

Captive lenders argue that the scheme forced an unlawful blanket assumption that most customers suffered financial losses if their commissions were not clearly disclosed. Volkswagen Financial Services UK has set aside £725 million for expected expenses under the scheme, based on the FCA's policy statement, but claims the rules lack clarity for captive finance providers.

Lenders have criticized the FCA for using complex economic modeling to justify the scheme and refusing to share data with affected firms or the Upper Tribunal. Consumer Voice accuses the Treasury of exerting unprecedented influence over the scheme and calls for full disclosure in the regulator's communications with the government.