Mercedes-Benz, VW join challengers of $12 billion UK car finance redress scheme
Major Automakers and Consumer Groups Challenge UK Motor Finance Compensation Plan
By Kirstin Ridley and Sam Tobin
Overview of the Redress Scheme
LONDON, April 29 (Reuters) - Mercedes-Benz and Volkswagen are among four groups to challenge a 9.1 billion pound ($12.3 billion) consumer redress scheme imposed by Britain's markets regulator on the UK motor finance industry for misselling historic motor loans.
Automakers' Response and Legal Actions
The financial services arm of VW said on Wednesday that it had asked the courts to help clarify elements of the compensation plan hours after Mercedes-Benz confirmed it was also among those challenging the scheme.
"We support redress for customers who were genuinely disadvantaged, but it is also important that any scheme is lawful, fair and properly targeted," a spokesperson for Volkswagen Financial Services UK said.
Regulator's Position and Industry Impact
The move is disappointing for the Financial Conduct Authority, which said three lenders and a consumer group were challenging a compensation scheme designed to draw a line under a 17-year scandal. It did not identify the lenders.
"We are considering our approach and will set out more later this week," a spokesperson said.
Background on the FCA Redress Scheme
The FCA in March trimmed the final bill for one of Britain's costliest financial misselling scandals in an attempt to balance its duty to protect consumers from harm, promote growth - and ward off legal challenges.
The scheme is designed to compensate consumers for inadequately disclosed commissions paid by lenders to motor dealerships and where contractual ties between lenders and dealerships were not properly visible for customers.
The FCA had hoped the first payments to consumers, estimated at 830 pounds per vehicle loan agreement, would start this year. But legal challenges can be lengthy and costly.
Financial Institutions' Reactions
Banks' Provisions and Stance
Banks including Lloyds, Santander, Barclays, specialist lender Close Brothers and the finance arms of vehicle manufacturers have collectively set aside billions of pounds for compensation.
Leading banks are not challenging the scheme, although Santander UK, the Spanish bank's British arm, set aside another 207 million euros ($242.2 million) to cover redress costs on Wednesday.
Automaker and Consumer Group Perspectives
Sky News first reported that Mercedes-Benz planned to challenge the scheme and that Volkswagen was expected to follow suit.
BMW told Reuters that although it did not agree with every aspect of the redress scheme, it believed it provided the fastest and easiest route to resolution for customers. Credit Agricole declined to comment.
Consumer Group Legal Challenge
Consumer group Consumer Voice, meanwhile, said on Monday it had also filed a legal challenge because the FCA scheme "systematically undercompensates consumers".
Additional Information
($1 = 0.7408 pounds)
($1 = 0.8546 euros)
(Reporting by Kirstin Ridley and Sam Tobin, writing by Kirstin Ridley; Editing by Sharon Singleton)
