UK Tribunal Unlikely to Hear Car Finance Compensation Case Before October
Delay and Legal Challenges to UK Car Finance Compensation Scheme
Background and Current Status
LONDON, May 8 (Reuters) - Britain's financial watchdog said on Friday a tribunal hearing on legal challenges to its compensation scheme for mis-sold car loans was unlikely before October, and told lenders to prepare for a possibility that the scheme could be scrapped entirely.
Mercedes-Benz <MBGn.DE> and Volkswagen <VOWG.DE> are among four groups including a consumer group to have challenged a 9.1 billion pound ($12.3 billion) scheme imposed by the Financial Conduct Authority on the UK motor finance industry for the mis-selling.
The move was a blow for the regulator, which unveiled its final compensation scheme earlier this year in an attempt to draw a line under a 17-year scandal.
Acceptance and Response from Lenders
Other lenders, including big lenders Lloyds Banking Group, Barclays and Santander's UK arm, accepted the FCA's revised scheme, after collectively setting aside billions of pounds to pay affected consumers.
FCA's Statement and Ongoing Engagement
"We are engaging with the Tribunal and those who have challenged the scheme on the possibility of suspending some elements of it while retaining those relating to preparatory work," the FCA said in Friday's statement, adding it would provide another update soon.
Companies should prepare "on a precautionary basis" for a tribunal decision in mid-November, the FCA noted.
Operational and Consumer Impact
"We recognise the operational strain and uncertainty firms face. We also acknowledge the frustration of consumers, many of whom have waited over 2 years for an answer," the regulator said.
Firms should continue to prepare for the scheme while also undertaking contingency planning including for the possibility of there being no scheme, it added, noting that if the scheme or parts of it were quashed the regulator would consider all options.
"Lenders need, therefore, to be operationally and financially ready for a complaint-led and supervisory approach to resolve historic liabilities," it said.
"We recognise the impact this would have on consumers who may not always complain. This would also impose significant extra costs on lenders..."
Potential Compensation and Next Steps
The FCA had hoped the first payments to consumers, estimated at 830 pounds per vehicle loan agreement, would start this year.
($1 = 0.7341 pounds)
(Reporting by Tommy Reggiori Wilkes in London and Simone Lobo in Bengaluru; Editing by Anil D'Silva and Louise Heavens)
